China PMI Surges To 50.4

China's PMI finally showed a heartbeat. The HSBC "flash" reading of its China manufacturing Purchasing Managers' Index (PMI) was 50.4. It is measured on a 100 point scale. A number over 50 shows expansion, and the figure for the People's Republic has not be above that level for a year.

According to MarketWatch, Nomura economist Zhiwei Zhang said, "It shows that the policy easing has continued to support a growth recovery, and reinforces our view that growth will pick up strongly in the fourth quarter to 8.4% from 7.4% in the third quarter."

The open issue is where the manufactured goods have gone will go in the near future.

One theory is that demand in the U.S., EU, U.K., and Japan are better than their trade balances and GDPs would suggest. There is little rational support for that point of view.

Another possibility is that the Chinese consumer has lost some of his fear about a slowdown within the nation's own borders. But, such a spring up in optimism seems unlikely as China GDP slows. Business spending by the government, particularly on infrastructure projects might support PMI.

The last possibility is that the central government has masked actual numbers. This would mean outright lying, or that manufactured goods have piled up on docks, in warehouses, and on ships.

The Chinese are not above that kind of deception.

Douglas A. McIntyre

Filed under: 24/7 Wall St. Wire, China Tagged: featured