Chinese manufacturing activity picked up in May as a series of government stimulus measures appeared to be taking effect.
Beijing has rolled out several pro-growth policies in recent months as the world’s second-largest economy has shown signs of stalling after years of rapid expansion.
China’s official purchasing managers’ index, an indicator of the health of large industrial companies, came in at 50.8 in May, the highest reading this year and up from 50.4 in April.
“The continued improvement in May’s PMI shows that signs of economic recovery are becoming more obvious,” said Zhang Liqun, a researcher at the China Federation of Logistics and Purchasing, which publishes the data with the National Bureau of Statistics.
An alternative index published by HSBC and focusing more on smaller, private companies also showed an improvement in manufacturing sentiment last month, with a preliminary reading of 49.7 in May, compared with 48.1 in April.
Although it was still below a reading of 50 that indicates the difference between contraction and expansion in the sector, it was also the highest reading so far this year.
China’s economy is looking weaker than at any time since the global financial crisis, as a heavy debt load, weak global demand, overcapacity and bursting real estate bubbles all weigh on growth.
Of particular concern is the slowdown in the Chinese real estate market, which has been the key driver of the economy over the past decade but which has created bubbles in parts of the country.
Average prices for new homes fell in May from the previous month – the first contraction in nearly two years – according to data provider China Real Estate Index System.
Gross domestic product grew 7.4 per cent from a year earlier in the first quarter, the slowest pace in a year and a half and down from 7.7 per cent expansion in the fourth quarter last year.
Even if the economy does meet the government’s target of 7.5 per cent growth this year that will still be the slowest pace since 1990, when the country was still facing international sanctions in the wake of the June 1989 Tiananmen Square massacre.
Liu Ligang, chief China economist at ANZ bank, said: “The improvement of both PMIs suggests that the economic activities have stabilised somewhat due to the recent pro-growth policies.” But “in our view, these targeted ‘mini stimulus’ measures are not sufficient to prevent sentiment from deteriorating again.”