China’s PMI indicates robust economic recovery

According to the China Federation of Logistics and Purchasing, a logistics social organization, the country’s Purchasing Managers Index (PMI), an indicator of economy activity, rose by nearly 100 basis point to 55.2 in October from 54.3 in September.

The PMI above 50 indicates that the economy is expanding and below 50 represents that the economy is contracting.

The index went as low as 38.8 last November, when recession had stymied world economies.

But as the economies around the world are now slowly recovering, China is the only major country to register 8.9 percent growth in the third quarter.

Demand surging
The PMI for the month of October revealed that out of the 11 categories, consisting of 700 companies, 7 categories rose.

Further, the country’s imports, which largely comprises raw material for exports, reported 2.1-point increase from to 52.8 from 50.7.

Even the output index rose 59.3 in October from 58 last month, and there has been a surge in new orders from 56.8 to 58.5.

Driven by the economic stimulus package injected into the economy, auto sales have risen with passenger car purchases crossing 1 million for the first time in the month of September.

Government to continue stimulus spending
There is no doubt that the boisterous economic recovery has been the result of stimulus spendings by the government and credit support by the banking system.

Though these measures have led to overcapacity in some industries, the administration in keen on continuing monetary support. The government has spent just half of the 4 trillion yuan announced as fiscal stimulus.

Jing Ulrich, chairman of China equities and commodities at J.P. Morgan, was quoted by Reuters as saying, "Until greater inflationary pressure and a sustained recovery in exports become apparent, pro-growth economic policies are expected to remain in place.”