MNI: China Manufacturing PMIs To Remain Above 50 In Q4

MNI (BEIJING) - China’s economy will continue to improve in Q4 underpinned by strong manufacturing with official and private PMIs expected to remain within expansionary territory in November and December following their rebound above the 50-mark last month, mainland economists told MNI, noting further policy stimulus to boost household income should not be ruled out.

China’s GDP will likely grow at least 5.1% in Q4 and 4.9-5.0% over 2024, said Wang Zhe, senior economist at Caixin Insight Group, adding the economy will maintain the momentum witnessed at the end of September throughout Q4 as policy stimulus takes effect and exports rise.

Recent Caixin PMI data showed market demand stabilising, with the sub-index for total new orders reaching the highest point since June, Wang said. However, authorities may need to provide policies that boost household disposable income given labour and pricing sub-indexes remained weak, he cautioned.

The NBS PMI for October expanded for the first time since April, but the decline in upstream raw materials sub-indexes narrowed – while holding below 50 – showing the economy’s overall recovery remained shaky, Wang explained.

FURTHER STIMULUS 

While the PMIs will hold above 50 in the near term, the government will still need to provide further stimulus given broader economic challenges, said Nathan Chow, senior economist at DBS Bank. Authorities have likely preserved policy space given future uncertainty, he continued.

The pace of manufacturing expansion will likely accelerate in coming months as government policies take effect, said Zhou Maohua, an economist at China Everbright Bank. Recent results proved government initiatives, such as allocating CNY300 billion of ultra long-term treasury bonds towards equipment upgrades and consumer good trade-in subsidies, had boosted manufacturing and authorities will likely extend the scheme next year given its success, Zhou said.

“The fact both PMIs rebounded above 50 suggests manufacturing momentum was more widespread than before,” Zhou continued.

The more export-focused Caixin PMI is due Dec 2, while the broader-based official PMI will be revealed Nov 30.

EXPORTS RISE

China’s exports rose 12.7% y/y in October, the fastest pace in two years, and will continue to grow strongly over November and December as exporters rush to complete orders, Wang said. A slowdown in exports was not expected despite the Caixin PMI new export order index at 49.5 in October, he added.  

Chow argued concerns over potential tariffs may be “driving frontloading activity.”

Resilient overseas demand would support relatively fast-paced export growth in the final two months, Zhou said, as Beijing increased overseas sales of electric vehicles, batteries and solar panels, and enhanced trade with ASEAN and BRICS partners.