MNI: China Exports Strong In H2, Despite Diverging PMIs
China's exports in H2 will hold strong.
China’s export growth will remain strong in H2, following May's 6.1% year-to-date increase, driven by competitive advantages in manufacturing and greater trade-partner diversification, and despite the widening gap between official and private PMI results, economists have told MNI.
Wang Zhe, senior economist at Caixin, noted the Caixin Manufacturing PMI will likely hold above the expansionary 50 mark in H2 driven by China's competitive manufacturing advantage and its push to diversify trading partners.
The Caixin Manufacturing PMI hit a 23-month record of 51.7 in May, while the National Bureau of Statistics (NBS) PMI dipped 0.9 points to 49.5, a multi-year high divergence between the two indices driven by downstream strength along east coast export-oriented SMEs, which weigh more heavily in Caixin’s survey, Wang noted.
Caixin's private PMI includes around 650 private and state-owned firms and is known for being more export centric than the NBS PMI, which captures broader-based activity from 4,300 firms.
Wang said export growth will continue to be robust, even though Caixin's new export order sub-index has decreased to 50.9 from April's peak of 53.3, which he attributed to normal fluctuations.
China’s Industrial output grew 6.2% from January to May. (See MNI: China Electricity Demand Growth To Fall From Q1 High)
Nathan Chow, senior economist at DBS in Singapore, argued the regional recovery in electronics and the impending surge in Christmas orders will also benefit exporters in the near term.
OFFICIAL PMI
The NBS manufacturing PMI, which has printed above the 50 mark for three of the past 12 months versus Caixin’s 11 months, was dampened by the sluggish outlook in upstream basic raw material sectors, Wang noted.
“High commodity prices and soft expectations are hampering upstream firms,” Wang continued, noting the NBS PMI raw material sub-index averaged 48.1 in the past seven months, versus 50.7 for equipment manufacturing.
Chow noted recent official PPI data, which declined for the 20th straight month by 1.4% y/y in May, showed many companies are still struggling outside of the narrower Caixin survey.
“Weakness in domestic data such as consumption and FAI stems from the continued sluggish property market, meaning policy should remain supportive to counter these challenges,” Chow said.