The latest reading of the Purchasing Managers’ Index (PMI) for China, sponsored by banking giant HSBC, shows that the sector has rebounded to growth this month. The current reading for PMI is 50.8, up from May’s value of 49.4 (showing contraction). A value above fifty shows expansion whereas results below this value indicate contraction. The June figure marks the first expansion in the sector, measured by the HSBC PMI survey since December of last year. The survey is conducted on smaller manufacturing concerns.
The most recent PMI value could be evidence that stimulus measures put in place by the Chinese authorities are beginning to bear fruit. One such measure that may have been effective was a cut in taxes payable by smaller enterprises. The government also announced a partial easing of the reserve ratio requirement (RRR) for banks lending to small businesses and agricultural concerns in a bid to boost liquidity in this sector. Banks are also being encouraged to lend to businesses engaged in exports. RRR had been used as a tool to rein-in speculative investment in the property sector by forcing banks to hold more cash, choking off the money supply.
Economic stimulus is also being applied through infrastructure projects which will see the construction of new railways throughout the nation in addition to new roads and airports along the Yangtze River aimed at boosting development in the inland provinces and improving connectivity with Shanghai.
In an unrelated development, China has announced deals with Greece worth $5 billion involving exports and shipbuilding. China is also said to have interest in partnerships with Greece over port facilities, railways and airports. For its part, Greece is desperate for foreign investment as it struggles to reduce mass unemployment and resolve its economic problems.