Recovery on horizon as economy regains strength
Factory activity in China continued to contract in April, the Caixin China Purchasing Managers' Index (Caixin PMI) showed on Tuesday, but experts said the recovery of the world's second-largest economy remains on track.
The Caixin PMI edged down to 49.4 in April from 49.7 points in March, the 14th straight month below the 50-point neutral level. A reading above 50 points indicates expansion while one below indicates contraction.
"These fluctuations indicate the economy lacks a solid foundation for recovery and is still in the process of bottoming out," said He Fan, chief economist at Caixin Insight Group, sponsor of the survey, according to caixin.com.
But Xu Gao, chief economist of China Everbright Securities Co, was more optimistic despite the deteriorating PMI data.
"This will not change the recovery momentum of China's economy," he told the Global Times on Tuesday, citing reasons such as improved capital flows in the real economy as well as promising prospects for China's infrastructure investment and the nation's exports.
The April Caixin PMI is generally in line with the official PMI released on Sunday, which stood at 50.1 points in April, down from 50.2 in the previous month, National Bureau of Statistics data showed.
"The PMI will hover around the 50-point neutral level with a steady rise in the first half of this year," Liu Xuezhi, a senior analyst at Bank of Communications, told the Global Times, citing such factors as the nation's proactive fiscal policy and a possible pickup of foreign demand.
"Currently, China's foreign trade situation is quite complicated and grave," Liu said.
"Business sentiment in advanced economies delivered a positive message recently, with both the US ISM index and IFO business expectations picking up," Wang Tao, chief China economist at UBS, wrote in a note sent to the Global Times on Tuesday.
"Meanwhile, April's official manufacturing PMI suggested a slightly softer momentum in China's export demand. Combined with a high base last year, we think China's headline export growth likely slowed to 3 percent year-on-year," Wang said.
But Xu is optimistic about the outlook. "Based on experience, the recent devaluation of the yuan's exchange rate will have a positive effect on exports."
China's GDP growth was 6.7 percent in the first quarter of 2016, the slowest pace since 2009.
But Xu noted that the recovery momentum will become more obvious in the second quarter since the central government has showed a strong commitment to maintain steady economic growth.
