Caixin’s survey reinforces the government data that showed improvement in China’s factory activity in November

Caixin’s survey reinforces the government data that showed improvement in China’s factory activity in November
  • Caixin survey shows China's manufacturing PMI saw fastest expansion in the past three years.
  • The survey reinforced the upbeat figures of China's Bureau of Statistics on Saturday.
  • Sub-indices of both surveys point at patchy recovery that may be difficult to sustain.
  • China's bluechip CSI 300 index gained by 0.68% on Monday following Caixin's report.
  • Forex market responded lucratively to economic data, sending USD/CNY up to 7.0446.
  • U.S - China trade complications remain to be a threat for the largest Asian economy.

China’s National Bureau of Statistics released positive figures for the country’s manufacturing and non-manufacturing PMI on Saturday. Showing slight improvement, a few of the analysts were skeptic of the data. As of Monday, however, a private sector firm, Caixin, highlighted its insight into China’s factory activity in November. As per Caixin’s survey, the manufacturing PMI for China improved significantly in November and is approaching a high for almost three years. With reinforcement from Caixin’s survey, it is evident that the largest Asian economy has indeed rekindled the factory activity amidst the ongoing U.S – China trade tensions.

Despite the upbeat figures, however, experts of the financial markets remain cautious of the deflationary risk in the upcoming weeks. Highlighting that both surveys had their sub-indices hinting at a patchy recovery, analysts opinionated that the worst may not be over for China and the economic improvement is likely to be harder to sustain.

Caixin Reports China’s Manufacturing PMI At 51.8 In November

Caixin Manufacturing Purchasing Manager’s Index (PMI) was recorded at 51.7 in October. Considering the trade complications, analysts had previously estimated it to be capped at a lower 51.5 in November. Beating both the analysts’ forecast and figure for last month, Caixin noted China’s factory activity at 51.8 this month. Keeping well above the 50 mark, the figure represents that the economic contraction has faded away and the Chinese economy is all set for growth. The improvement in the PMI marked the fastest expansion since 51.9 that was reported in December 2016.

Following Caixin’s survey results, Asian shares were reported celebrating on Monday. CSI 300 (China’s bluechip index) was last seen trading 0.68% higher earlier this morning. Total new orders showed the fastest growth in October in over six years, while factory production hiked to the best in almost three years. While the figures for November remained upbeat, they were registered slightly lower than October’s highs.

Caixin’s manufacturing PMI differs from the government report since it focuses more on export-oriented firms. The geographical areas included in Caixin’s survey are different from that of the official report as well.

Forex Market Responded Lucratively To Caixin’s Report

According to the sources, the forex market surely responded lucratively following the Caixin’s report. From a low of 7.0259, USD/CNY gained significantly to print a daily high of 7.0446 on Monday. The currency pair is currently exchanging hands at 7.0418.

All in all, however, analysts have recommended being cautious of the upbeat figures since the ongoing U.S – China trade complications can weigh on the Chinese economy at any time in the upcoming weeks.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.