Divergent China PMIs Tell Clear Story

China, Company Strategy, Economics

ChinaPMisJuly2013

By John Richardson

CONFUSED? You shouldn’t be. Yesterday’s announcement of two Chinese purchasing managers’ indices for July, which had moved in opposite directions, merely underlines the imbalances in China’s economy.

The final HSBC/Markit PMI for July came in at 47.7 – an 11-month-low and the same as the flash forecast released a couple of weeks ago – is the most important measure for the chemicals industry, as its survey sample comprises mainly small and medium-sized enterprises (SMEs). It is the SMEs that make up the bulk of China’s chemicals and polymers buyers.

In contrast the official PMI, which measures predominantly big companies, rose to 50.3 in July from 50.1 in June.  The continued over-dominant role of the state-owned enterprises (SOEs) in economic growth can hardly be cause for cheer as China tries to rebalance its economy.

(For both indices anything above 50 represents expansion, whereas anything below 50 is a contraction.)

And you can call is cynical and/or sceptical, sure, but should one always trust Chinese government data?

“A couple of years ago, the official ones seemed to be favoured as a better measure because it was a bigger sample and supposedly a broader one too (Markit Economics rejects that criticism),” wrote the FT Alphaville blog in this post.

“Then some ambivalence set in as the two diverged and the HSBC/Markit survey looked better. Early this year the sample for the official PMI sample had been greatly increased (from about 820 to 3,000), but the government agencies who compile it (the China Federation of Logistics & Purchasing and the National Bureau of Statistics) didn’t provide much more detail on this change, as far as we can tell.

“Then for June, the industry sub-sections in the official PMIs were ‘suspended’ because ‘time is limited — there are many industries, you know’. Yes, that’s exactly what CFLP vice-president Cai Jin reportedly actually said.”

A further cause for concern is that, as FT Alphaville also points out in the same post, the weaker HSBC/Markit PMI might be partly because the June credit squeeze is likely to have hurt the less well-connected SMEs more than the big companies.  This underlines the challenge that Beijing faces in directing money to the right parts of the economy as it pushes ahead with reform.

PREVIOUS POST

Water Shortages to Scupper China CTO Industry

01/08/2013

  By John Richardson THE debate about how exactly how much coal-to-olefins ...

Learn more
NEXT POST

Australia Misses China Slowdown, Faces Aus$33bn Writedown

05/08/2013

By John Richardson THE blog was amazed over the weekend when it discovered that ...

Learn more
More posts
Here is your guide to Asian and Global HDPE markets in Q4 this year and in 2022
25/10/2021

By John Richardson THE COMING COLLAPSE of China, as I’ve discussed is before, is like commercially...

Read
China’s “Common prosperity” uncertainties multiply as we head into the unknown
21/10/2021

By John Richardson DON’T SAY I didn’t warn you. This article in The Wall Street Journal confirms...

Read
China provides major climate hope as latest IEA report underlines that it is all about the developing world
18/10/2021

By John Richardson WHEN I worked for a UK local newspaper as a “cub” or junior reporter in the 1...

Read
China’s less commodity intensive future requires major petchem strategic rethink
14/10/2021

By John Richardson THE THING about the collapse of China is that, like commercially viable nuclear f...

Read
China pulls multiple policy levers to fix energy shortages but don’t forget secular fall in demand
11/10/2021

By John Richardson Executive Summary CHINA’S POWER shortages could fixed by the end of this month ...

Read
China petchem project cancellations on “common prosperity” may not mean higher imports
06/10/2021

By John Richardson IT IS BEING suggested that China’s “common prosperity” policy pivot, the bi...

Read
China traditional Q4 petchems demand increase unlikely because of economic rebalancing
04/10/2021

By John Richardson A NEW RESEARCH PAPER by economists Kenneth Rogoff and Yuanchen Yang underlines th...

Read
China carbon limits and Evergrande tied together as short term growth challenges build
28/09/2021

By John Richardson Executive summary THE LIKELIHOOD that 227,000 tonnes of China’s polyethylene (P...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more