China’s economy continues to hold the line against a hard landing. The latest preliminary official purchasing managers index (PMI), a measure of manufacturing activity primarily in large and medium-sized companies, edged up to 53.1 in April from March’s 53.1. That was its fifth consecutive monthly increase and its highest level in a year. It follows the preliminary HSBC PMI for April of 49.1, 0.8 points higher than the final reading for March and a reversal of five months of decline. The HSBC index better reflects activity at export-dependent small- and medium-sized manufacturers and usually shows a lower number than the official PMI. For both indexes, a number below 50 signals contraction; above, expansion.
These numbers suggest that the increased bank lending that the central bank has allowed over the past month or so, even for small companies, is having some effect on moderating the slowdown in growth. Or at least overall. The official sub-index for small busineses fell in April by 1.8 to 49.1, highlighting how mixed and tenuous economic growth remains. GDP growth was 8.1% in the first quarter, its fifth consecutive quarterly deceleration. But with inflation still lingering, we expect the central bank to remain measured about further easing on both the monetary and fiscal fronts.