China Official PMI Hits Six-Month High in June

China's factory growth rose to a six-month high in June on improving domestic and foreign demand, adding to signs that the economy is regaining strength after an unsteady start to 2014.

The official Purchasing Managers' Index(PMI) stood at 51 in June, the National Bureau of Statistics said on Tuesday, quickening from May's reading of 50.8 and in line with market expectations. "The PMI reading continued to improve in June, indicating that the economy has basically stabilised," Zhang Liqun, a researcher at the Development Research Centre said in the statement accompanying the data.

"Various measures to stabilise the economy have become effective," Zhang said, referring to a slew of government stimulus measures announced in recent months. As one of the earliest pieces of Chinese data released each month, the improved PMI will bolster market expectations that the world's second-biggest economy is steadying, after hitting an 18-month low of 7.4 per cent between January and March.

The official survey showed a broad-based recovery in manufacturing activity in June, with nine out of the 12 sub-indicies pointing to improvement from the previous month. A sub-index for export orders edged up to 50.3 in June from 49.3 in May, hovering above the 50-point threshold separating growth from contraction.

The PMI also showed new orders, a measure of both foreign and domestic demand, inched higher to 52.8 in June from 52.3 in May, marking the highest reading since October 2013.

Analysts say the official survey is geared towards larger, state-owned factories.

A private survey which focuses more on small and medium firms showed activity expanded in June for the first time in six months as new orders jumped.

The final reading of the HSBC/Markit purchasing managers' index (PMI) for June rose to 50.7 from May's 49.4, surging past the 50-point level that separates growth in activity from contraction for the first time since December.

China's economy has recently shown encouraging signs as the government's policy measures started to kick in. Growth in factory output, retail sales and fixed asset investment all either met or beat market expectations last month, with retail sales notching its best showing in five months.

The measures included lowering the reserve requirement for more banks to boost lending, increasing the scale of re-lending and bond financing to support smaller firms, and a further reduction of administrative fees for businesses.

Copyright: Thomson Reuters 2014