PMI growth slows; signs promising

Data show manufacturing sector keeps momentum, sub indexes remain strong

China's manufacturing growth slowed in April as the government tightened supervision of financial risks, but still maintains momentum, according to analysts.

The Purchasing Managers' Index, which reflects the manufacturing sector's performance, registered 51.2 in April, slightly lower than 51.8 a month earlier, according to data from the National Bureau of Statistics released on Sunday. The figure remains above the year-ago index of 50.1.

A figure above 50 indicates growth in the sector, which is a key driver of the Chinese economy, while anything below points to contraction. The reading has kept above 50 for nine consecutive months.

Although the growth speed slowed down a little compared with the previous two months, remaining above the 50 boom-or-bust point means that the sector has not lost its growth momentum and the economic fundamentals remain sound, according to Zhao Qinghe, a senior NBS statistician.

"Slower growth of domestic demand and supply and contracting energy-intensive industries have dragged down the pace of expansion of the manufacturing sector," Zhao said.

The PMI of high energy consumption was 49.3 in April, which is 2.1 points lower compared with the previous month and 1.9 points lower than the manufacturing sector as a whole.

His comment is echoed by data from the NBS released on Thursday in which growth of profits made by major large-scale industries slowed by 3.2 points in March compared with the previous two months.

Sluggish earnings growth in traditional sectors such as coal and steel is one of the major driving forces of sluggish profit growth, according to He Ping, also a statistician with the NBS.

"As Beijing puts more emphasis on fending off financial risks, manufacturing enterprises might face a tighter financing environment in the short term, putting pressure on production and on sales," said Xie Yaxuan, chief economist with China Merchants Securities. "But the policy environment will not put the sector or the economy into recession because some major drivers retain their growth potentials."

Some promising signs can be found in sub indexes of the PMI, in the equipment sector, which registered 52.1 and the high-tech manufacturing sector, reporting 53.4, in April, both well above the overall manufacturing sector.

Xie said high demand for consumption will support continued recovery of the economy. He cited the continued expansion of consumption manufacturing PMI reading in April, when it stood at 52.2.