Positive data from China boosts bid to avoid 'hard landing'
A Chinese manufacturing gauge rose to a seven-month high in June, supporting Premier Li Keqiang's contention that the economy will avoid a hard landing as the government steps up efforts to spur growth.
A preliminary Purchasing Managers' Index from HSBC Holdings and Markit Economics stood at 50.8, exceeding the 49.7 median estimate of analysts surveyed by Bloomberg News and a final reading of 49.4 in May. A number above 50 indicates expansion.
JPMorgan Chase & Co and Barclays Plc raised growth forecasts after the report suggested the government's measures will help protect its 2014 target of about 7.5pc even as fixed-asset investment gains slow and the property market slumps. Mr Li said last week that his officials are making adjustments to aid expansion without resorting to "strong" stimulus.
"It is a very good number," said Dong Tao, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. "It is a surprise, too, as most people are focusing on infrastructure investment and the property market."
While the data sparked early gains in stocks, the advance was wiped out amid investor speculation that falling property prices and tighter liquidity in the banking system will weigh on economic growth, said Huaxi Securities Co. The Shanghai Composite Index slipped 0.1pc, with a gauge of developers slumping 1pc.
The report, known as the Flash PMI, is typically based on 85pc to 90pc of responses to surveys sent to purchasing managers at more than 420 companies. The final reading is due July 1.
The survey showed increases in subindexes for output and new orders, a faster drop in stocks of finished goods and a slower decline in jobs. New export orders expanded at a slower pace and input prices rose, according to HSBC and Markit.
A separate manufacturing PMI from the National Bureau of Statistics and China Federation of Logistics and Purchasing will also be published July 1. That gauge rose to 50.8 in May, the highest reading since December, from 50.4 in April.
The Chinese government will "continue rolling out more measures to stabilise growth", Lu Ting, chief Greater China economist at Bank of America Corp in Hong Kong, said.
Another private report showed China's economic slowdown deepened this quarter, as capital spending showed weakness and fewer companies applied for credit.
The slowdown hurt hiring and wages, and interest rates offered by shadow lenders fell below levels offered by banks, according to the China Beige Book, a quarterly survey.
Speaking in London on June 18, Mr Li said China will rely on "smart and targeted regulation" rather than strong stimulus to protect the official growth target.
"I can promise everyone honestly and solemnly, there won't be a hard landing." (Bloomberg)