BEIJING--Two measures of China's factory outlook registered an
improvement in March, suggesting that government moves to boost the
world's second-largest economy are having an impact.
While markets rose on the news, large state-owned companies in
line for government contracts appeared to be the major
beneficiaries behind Wednesday's better-than-expected readings,
economists said. There was little evidence that smaller, private
companies are seeing much improvement, they said.
Nor is the uptick enough to counter weak fundamentals or signal
a turnaround soon, they added, suggesting that Beijing will need to
adopt more easing measures in coming months.
"In March, there's always a pickup after Chinese New Year, but
this year it's weaker than the seasonal pattern," said Mizuho
economist Shen Jianguang. "For all companies, profit growth has
declined. The slowing trend is clear. It's a more difficult
environment, with orders slowing and a lower order book."
The China Federation of Logistics and Purchasing said Wednesday
that China's official Purchasing Managers Index rose to 50.1 in
March from 49.9 in February, its first time in positive territory
since December. This was above the median 49.8 forecast by a Wall
Street Journal poll of nine economists.
A PMI reading above 50 indicates an expansion in manufacturing
activity over the prior month, while a reading below 50 points to a
contraction.
Economists said the higher March figure for the official PMI, a
measure that tends to reflect the outlook for large companies,
suggests that monetary easing and government spending on road,
energy, water and airport projects are beginning to filter through
to state-owned corporations.
The Hong Kong and Shanghai stock markets rose by nearly a half
percentage point on Wednesday morning on the news, while the
China-sensitive Australian dollar jumped against its U.S.
counterpart.
Subindexes measuring new orders and new export orders both fell
in March from February levels, while the production subindex
improved, according to the logistics and purchasing federation,
which issues the data with the National Bureau of Statistics.
A competing measure, the HSBC China manufacturing PMI, fell to a
final reading of 49.6 in March from 50.7 in February, HSBC Holdings
PLC said Wednesday.
"Small enterprises and export-oriented businesses remain under
significant pressure," said UBS economist Harrison Hu.
China set an annual growth target in March of about 7%, down
from actual growth of 7.4% in 2014, its slowest pace in nearly a
quarter century. With momentum slipping and companies facing
mounting debt, Beijing has in recent months put through two
interest-rate cuts and a reduction in bank-reserve requirements. On
Monday, it reduced down payment requirements for home buyers in a
bid to support the troubled property market.
But these measures probably aren't enough to put a floor under
the wobbly economy, economists said. Investment, retail sales,
industrial production and property figures were all significantly
weaker than expected in January and February, and a weak
first-quarter growth figures due out in mid-April could complicate
Beijing's bid to hit its roughly 7% annual target.
"The government won't allow the growth to slip below 7%," said
ANZ economist Zhou Hao. "I think there will be more support
measures being rolled out soon to stabilize market
expectations."
Those measures could include increased infrastructure spending,
additional interest-rate reductions and more cuts in bank reserves,
economists said, which could see growth start to pick up in the
second quarter.
"There's a lot more to be done," Mizuho's Mr. Shen said. "But
it's good the government has started to respond."
China's official nonmanufacturing PMI, a gauge of activity
beyond the factory floor, fell to 53.7 in March from 53.9 in
February, the government said Wednesday.
Grace Zhu and William Kazer
Write to Mark Magnier at mark.magnier@wsj.com
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