China Manufacturing Indexes Point to Improving Economy (DJ)
Last Modified: 12:29 AM, Mon Dec 02, 2019
02 December 2019

BEIJING--After months of slowdown, China's economy showed signs of stabilizing, while Beijing said it won't compete with other nations in easing policy.

Surveys of manufacturers point to improving confidence and demand last month. The private Caixin manufacturing purchasing managers index rose to 51.8 in November from 51.7 in October, Caixin Media Co. and research firm Markit said Monday. China's official manufacturing PMI, released Saturday, rose to 50.2 from 49.3.

A figure above 50 represents expansion; below 50, contraction.

For the Caixin PMI, tilted more toward smaller and export companies, it was the fourth straight month of growth in manufacturing activity. For the official PMI, which covers a much larger number of larger companies, it was the first since April.

The government's measures to arrest the economic slowdown, begun last year, have started to have an impact, said Yang Weixiao, an economist at Founder Securities: "People have been very pessimistic for the most part of the year but confidence seems to have turned around in the fourth quarter."

Officials also seem more confident about maintaining the current policy stance. Beijing has focused on boosting lending to small businesses and infrastructure investment.

In an article published Sunday, People's Bank of China Gov. Yi Gang said the central bank won't resort to "competitive" quantitative easing, even if interest rates in other major economies approach zero.

Growth remains within a reasonable range and inflation is relatively mild overall, Mr. Yi wrote in the Communist Party's main political journal, Qiushi.

Some major advanced economies have had trouble exiting from quantitative-easing measures put in place during the global financial crisis a decade ago, he wrote, saying "China should maintain a normal monetary policy as long as possible."

The Federal Reserve in October cut interest rates for the third time this year but signaled it wouldn't reduce them further unless the economy slows sharply.

The Chinese economy, the world's second-largest, grew 6% in the third quarter, the floor of the central government's full-year target range. Policy makers have been struggling with rising consumer inflation, driven by highflying pork prices, and deepening industrial-price deflation.

Mr. Yi's comments indicate the central bank wants to retain as much firepower as possible for future slowdowns, said Julian Evans-Pritchard, an economist at Capital Economics in Singapore.

"It has been very restrained in its approach to recent monetary easing, cutting rates only five basis points at a time, for example," he said, referring to a rate-cutting strategy that the central bank has adopted since August. That would probably start to change if the slowdown worsens, he said.

China last week held off from retaliating after President Trump signed a bill supporting Hong Kong's anti-Beijing protesters. Officials on both sides said they were still confident they can sign a partial trade deal in the coming weeks.

Boosted by stronger-than-expected manufacturing reports, China's stock markets rose Monday, while the government bond prices dropped sharply.

Mr. Yang of Founder Securities said China's economic growth will probably hold steady at around 6% in the fourth quarter. Many economists had forecast it would slip further below 6%.

Liyan Qi

(END) Dow Jones Newswires

December 02, 2019 00:29 ET (05:29 GMT)

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