China: PMIs still suggest a solid recovery – UOB

Ho Woei Chen, CFA, Economist at UOB Group, reviewed the recent PMI figures and recovery prospects in the Chinese economy.

Key Quotes

“The Markit/Caixin China manufacturing PMI rose 0.6 points to 53.6 in October from 53.0 in September, recording its 6 th consecutive month of expansion (above-50 reading). This is also the highest reading since January 2011.”

“The rebound in the manufacturing sector from the pandemic low continued to be led by the large-sized enterprises. The Manufacturing PMIs for large-sized enterprises (52.6 from 52.5 in Sep) and medium-sized enterprises (50.6 from 50.7 in Sep) had remained in expansion in October whilst the small-sized enterprises slipped back to contraction (49.4 from 50.1 in Sep).”

“The CFLP non-manufacturing PMI rose 0.3 points to its highest level since October 2013 at 56.2 from 55.9 in September. The stronger reading is likely to be boosted by the Golden Week given pent-up demand and the easing of capacity restrictions at tourist sites ahead of the long holiday.”

“Overall, China’s October PMIs suggest a sustained recovery in both the manufacturing and services sectors in 4Q20 which means that more broad-based easing measures will likely not be necessary… We have raised our 4Q20 GDP forecast to potential growth rate of 6.2% y/y from our previous forecast of 5.7% with our full-year 2020 GDP growth at 1.9%.”