China Manufacturing PMI Spikes amid Trade Deal Hopes



  • Both the official and Caixin/Markit surveys showed a rebound in China’s manufacturing PMI in November.
  • Last month, there was renewed optimism that the US and China could reach phase one of the trade deal. However, the deal has been elusive. US support for Hong Kong protestors might complicate the situation.
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China manufacturing PMI

In November, China’s manufacturing PMI, both the official and the private Caixin/Markit survey, were better than expected. The Caixin/Markit survey showed China’s November manufacturing at 51.8 compared to 51.7 in October. The official survey put China’s manufacturing PMI at 50.2 compared to 49.3 in October. Notably, both of the survey results were above 50, which shows an expansion in the manufacturing activity. The official PMI was the highest since March, while the Caixin/Markit PMI reading was the highest in almost three years.

Comparing the manufacturing PMI’s two versions

Notably, over the last few months, there was some divergence in the official and Caixin/Markit survey. While the Caixin/Markit survey has shown an expansion since August, China’s official manufacturing PMI was below 50. While the official survey is mainly based on large state-owned enterprises, the Caixin/Markit survey focusses on small and medium enterprises. The Caixin/Markit November survey showed a rebound in domestic and international orders for Chinese companies. The export orders rose in October. The November Caixin/Markit manufacturing PMI survey showed that the employment subindex expanded. However, the survey also showed that business sentiment is still tepid.

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Trump’s tariffs

The US-China trade war and Trump’s tariffs have taken a toll on China’s economy. Several US companies, including Apple (AAPL), are exploring ways to diversify their supply chains to other countries. The uncertain environment impacted China’s manufacturing PMI. The trade war has also impacted the US economy. Corporate investment activity sagged despite the tax cuts. Unwilling to spend, US companies have resorted to share repurchases. The US manufacturing PMI has also been weak over the last few months. Notably, the US manufacturing PMI fell to the lowest levels since 2009. Later in the day, we’ll get the US manufacturing PMI for November.

Phase one of the trade deal

Over the last few months, the markets have been betting on phase one of the trade deal between the US and China. Easing trade tensions might have helped the rebound in China’s November manufacturing PMI. However, there are still differences in phase one of the trade deal. While China insists on removing existing tariffs, President Trump hasn’t committed so far. Reportedly, the US wants a hard number for China’s agricultural goods purchases and not just commitments. Also, US support for Hong Kong protestors might impact relations between the world’s two largest economies.


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