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Fast Comment ChinaSurprisingly strong manufacturing PMIs

  1. Third increase in a row of Markit’s PMI, whereas official PMI remained below 50
  2. We see a further slowdown on the cards
  3. No effect from factory closings
Third increase in a row of Markit’s PMI, whereas official PMI remained below 50
The manufacturing PMI from Markit/Caixin surprisingly jumped a full point from 50.4 in August to 51.4 in September compared with expectations of a slight decline. This was the third month in a row of increases. Additionally, the official PMI rose, albeit much less so, from 49.5 to 49.8. We usually prefer the PMI from Markit/Caixin, as it puts a higher weight on private and smaller companies than the official PMI, which is heavy on state-owned enterprises. Still, we dare not call off the slowdown fear based on the upside surprise in Markit’s PMI as long as the official manufacturing PMI stays subdued below the 50 threshold.
We see a further slowdown on the cards
Manufacturers are hurting from the trade war, as exports to the US have plummeted, although this could reverse if a trade deal were to materialise. Nevertheless, we believe the Chinese economy will suffer over a longer time horizon, as foreign companies’ production is already being moved out of China and as foreign direct investment into China has been dampened owing to increased uncertainty. We expect growth to continue to decelerate over the coming years amid persistent trade turmoil and because we expect that further stimulus will be of measured magnitude only.
No effect of factory closings
The manufacturing PMIs in September do not seem to have been affected negatively by the forced closing of factories, especially around Beijing, ensuring a blue sky at the parades on October 1 to mark the 70th anniversary of the rule of the Communist Party of China.


Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

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