By Richard Silk
BEIJING--A closely watched gauge of activity in China's
manufacturing sector rose in October, a result which may go some
way in easing concerns over the pace of Chinese economic
growth.
The preliminary HSBC China Manufacturing Purchasing Managers
Index rose to 50.4 in October, compared with a final reading of
50.2 in September, HSBC Holdings PLC said Thursday. A reading above
50 indicates expansion from the previous month, while one below 50
means contraction.
The Hong Kong stock market briefly rallied on the news, before
quickly reversing as investors digested the details of the
report.
"While the manufacturing sector likely stabilized in October,
the economy continues to show signs of insufficient effective
demand," HSBC's chief economist, Qu Hongbin, said in a
statement.
Worries about China's growth have been building since the
beginning of the year, amid a drawn-out slump in housing prices and
worries about out-of-control lending. The export sector, long a
crucial engine of China's economy, has also suffered as the rest of
the world struggles with its own economic problems.
"Exports are still better than the domestic front, but it's a
seesaw," said Steve Wang, an economist at Reorient Financial
Markets in Hong Kong. "IT, semiconductors and technology seem to be
doing well."
Economic growth in the third quarter, reported earlier this
week, fell to 7.3% year on-year, its lowest level in over five
years, from 7.5% in the second quarter. While that figure is good
by most standards, it marks China's poorest showing since 2009.
Many economists expect the government to continue propping up
the economy, drawing on the playbook of infrastructure investment
and cheap money it has used in the past.
"The government has already started doing that, with newly
started railway projects and airports," said CIMB economist Fan
Zhang. The whole package may end up matching the size of the
second-quarter's stimulus measures, which succeeded in achieving a
short-lived rebound in the economy, he said.
Recently there have been some signs of a turnaround. Industrial
production was up 8% year-over-year in September, compared with an
unusually weak 6.9% in August. The decline in property sales also
slowed marginally in September.
The PMI is the first major indicator of the economy's
performance this month. The subindexes for input and output prices
both declined, indicating that weak demand continues to put a
damper on inflation, while the employment sub-index improved.
The preliminary PMI figure is based on 85% to 90% of total
responses to HSBC's PMI survey each month, and is issued about a
week before HSBC's final PMI reading.
--Liyan Qi and Mark Magnier contributed to this article.
Write to Richard Silk at richard.silk@wsj.com