China’s services Purchasing Managers’ Index hit a four-month high in December, rising to 56.1 from 55.6 in November, according to the country’s National Bureau of Statistics.
That was the best reading since September 2011 and the tenth month straight that it was above 50. A reading above 50 indicates expansion in the sector, while a reading below that mark indicates contraction.
The rising services PMI suggests that the Chinese economy may have stabilised, says Boris Schlossberg, managing director of FX Strategy at BK Asset Management.
Or is it?
But HSBC’s December figures for China’s services PMI reveal a slightly different picture. HSBC’s research found the non-manufacturing PMI had softened to 51.7 from 52.1 in November, with the latest reading the weakest since August 2011.
Economists, analysts and other financial market participants watch the PMI indicator as it provides a leading indicator of changing market conditions, based on senior purchasing managers’ buying intentions.
Purchasing Managers’ Indices are issued each month and give a snapshot of individual countries’ economies. Separate PMIs are complied for manufacturing sectors and service industries in a range of countries.
Private v public
China’s National Bureau of Statistics issues its set of PMI figures based largely on surveys of managers in state-owned firms.
HSBC’s set of PMI data is based on its own proprietary research, which draws on interviews with senior purchasing managers with a tilt towards the private sector.
Schlossberg says that as China shifts towards consumer-led rather than export-led growth, its services sector will take on more importance in the composition of its growth.
That will be good for China in light of economic weakness elsewhere in the world.
Asian businesses are in a strong position to weather the downturn, having learned harsh lessons during the regional financial crisis of the 1990s, says Noel Quinn, HSBC’s regional head of commercial banking, Asia-Pacific.
They have the “reserves and stamina” to cope with sluggish demand, they’ve maximised cost-efficiency, particularly in supply chain management, and have opened up new markets for their products, Quinn says.
That will put Chinese businesses, as well as companies in other countries across the region, in a solid position to capitalise on growth in the rest of the world when it returns.