The two newly released manufacturing surveys confirm the gradual reversal of the recent slowdown of China’s economy. The official Purchasing Managers’ Index reached an 18-month high of 51.4 in October. The HSBC/Markit final PMI for the month rose to a seven-month high of 50.9. A reading above 50 indicates expansion in the manufacturing sector, while a reading below 50 indicates contraction.
The key difference between the two is that the official PMI, which is weighted more towards bigger and state-owned enterprises, showed continuing weakness in new and export orders. That was less apparent in the HSBC/Markit survey, which is weighted towards smaller and private-sector firms. The question the difference poses is, how strongly will the momentum of the recovery carry through the rest of the fourth quarter. Strongly enough, we would hazard, for GDP growth to at least meet the official target of 7.5% for the full year.