Manufacturing activity in China climbs to five-month high

Government policies help manufacturing sector to expand, but economists say more will be needed to sustain growth

Manufacturing activity in China rose to a five-month high last month, in a sign that the sector remains robust against the backdrop of a weaker economy.

The world's second largest economy has shown further signs of slowing down in recent months. The economy grew at an annualised pace of 7.4pc in the first three months of the year, following growth of 7.7pc in the final quarter of 2014

By Szu Ping Chan

12:50PM BST 01 Jun 2014

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Manufacturing activity in China rose to a five-month high last month, in a sign that the sector remains robust against the backdrop of a weaker economy.

The official manufacturing purchasing managers index (PMI) climbed to 50.8 in May, according to National Bureau of Statistics. This was above the 50 reading that divides growth from contraction, and up from 50.4 in March. It was also higher than the reading of 50.6 expected by analysts.

“The so-called mini-stimulus is helping to stabilize the economy,” said Liu Li-Gang, chief economist for China at ANZ, who added that a "bigger move" by the government might be necessary to sustain the expansion.

Policymakers have been trying to move China away from its over-reliance on investment and exports to drive growth and want to shift the balance towards consumption.

While China is targeting growth of about 7.5pc this year, officials including Premier Li Keqiang have described this target as flexible.
Recent jitters about the economy have prompted policymakers to bring forward fiscal stimulus plans to help companies weather the economic slowdown.
Last week, China signalled that it could take steps to ease monetary policy to support the economy by cutting the amount of cash banks must hold in reserve. This would free-up cash for banks to lend out, with money targeted at small businesses and the agricultural sector.
Economists at HSBC have also said further easing will be needed to boost the economy this year. A separate survey published by the bank last month showed the manufacturing sector contracted slightly in May.