Chinese manufacturing indexes showed small businesses struggling, sapping momentum in the economy and underscoring the need for the government to shift support away from larger, state-backed companies.
The official Purchasing Managers' Index for smaller companies fell to 47.3 in May from 47.6 the previous month, even as the broader gauge rose to 50.8 from 50.6, the government said June 1. A private manufacturing index today that includes small enterprises fell more than forecast to 49.2, an eight-month low, from 50.4. Levels below 50 signal contraction.
The reports illustrate Premier Li Keqiang’s challenges in achieving sustainable growth across the world’s second-biggest economy while increasing consumption and reducing reliance on exports and investment. Declines in manufacturing gauges today in India, South Korea, Vietnam and Taiwan add to risks that Asian and global expansion will slow.
Divergences in the manufacturing indexes are common given their different focus and coverage, said Wang Tao, chief China economist at UBS AG in Hong Kong. The decline in the official PMI’s gauge for smaller companies is consistent with the HSBC index, Wang said before today’s release.
Rising property prices may limit any potential efforts by the government to aid growth. China’s new home prices jumped in May by the most since they reversed declines in December, a report today from SouFun Holdings Ltd., the country’s biggest real estate website owner, showed after a survey of 100 cities.
The PMI reading released June 1 by the National Bureau of Statistics and China Federation of Logistics and Purchasing in Beijing was higher than all estimates in a Bloomberg News survey of 30 analysts and compares with the median projection of 50, which marks the dividing line between expansion and contraction.
HSBC Holdings Plc and Markit Economics today gave the final May reading of their manufacturing index, whose 49.2 level was the lowest since September. The gauge, which surveys fewer companies than the government’s report, had a preliminary figure of 49.6 released May 23, and the median estimate of 14 analysts was also for 49.6 today.
