InvestmentsMay 8 2013

Chinese data ‘masks serious problems’

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ByEleanor Lawrie

Concerns have been raised that the slight drop in China’s purchasing managers’ index masks more serious difficulties for the country going forward.

China’s manufacturing purchasing managers’ index fell to 50.6 in April, down from 50.9 in March. Although a reading of more than 50 demonstrates positive sentiment, it was hoped that the index would show some gains from the month earlier, which was heralded as a potential turning point as it was the highest reading in 11 months.

“Another downbeat data release, this time of China’s official purchasing managers’ index, adds to evidence that the economy remains weak after the slowdown in Q1,” Capital Economics’ Mark Williams and Qinwei Wang said.

“Indeed, the headline figure probably overstates current strength, by failing to account adequately for a seasonal pick-up in April or the difficulties being faced by small firms.”

The disappointing data comes soon after the news that China’s GDP fell from 7.9 per cent to 7.7 per cent in the first quarter of this year, adding to the impression of a decline in productivity.

But Simon Ward, chief economist at Henderson, said the decline was not a particular cause for concern.

“The authorities don’t want the economy to grow strongly at the moment so the numbers are more or less in line with their objective,” he said.

“Some people think they are a prelude to more serious weakness but money supply is growing at a respectable pace and there’s no real signal the economy is going to fall off a cliff.”