Pro-real economy policies push China's factories to five-year high

World
Europe

China’s manufacturing purchasing managers' index (PMI) climbed to 52.4 in September from August’s 51.7, the highest reading since April 2012. That’s according to the National Bureau of Statistics.

The official PMI has been expanding for the 14th straight month, thanks to the government’s policies to support the real economy, as opposed to concentrating on purely financial developments.

The efforts are shown in bank loan numbers. Outstanding loans to the manufacturing sector from China's Big Four Banks stood at 5.73 trillion yuan in the first half year, up 5 percent from last year.

China’s manufacturing PMI from January to September /CGTN Photo

A recent report from the State Council shows that a total of 2121 manufacturing companies are listed in the A-share market, accounting for 63.6 percent of all firms listed. They made a total of 400 billion yuan in the first half-year, up almost 40 percent from last year's figure.

Smaller companies are also benefiting from the positive industrial environment.

Magnity Electronics specializes in making infrared imaging equipment. Many of the company’s clients are in manufacturing, and its orders in the first half almost doubled.

“Those clients’ clients are even bigger manufacturers like the State Grid, China Railway, automaker BYD and the big liquor makers, which means these big companies are also upgrading their equipment and technology,” said Shen Chongfei, CEO of Magnity Electronics.

VCG Photo

Apart from technology upgrades, higher sales volumes in certain manufacturing sectors also helped companies make higher revenues and profits, especially automakers and companies related to real-estate development.

That’s because manufacturing is a midstream sector, so it’s impacted largely by what happens on the demand side.

“The real estate sector has gotten a boost from sales in third and fourth tier cities since last year, and companies related to this sector are home appliances and other light industries. The automobile sector saw 20% growth last year after the government lowered purchase taxes,” said Yang Xiaolei, Senior Analyst with SWS Research.

(CGTN's Zhu Feng also contributed to the story)