China's Early Data Show Smaller Firms HurtingBloomberg News
Minxin manufacturing and non-manufacturing PMIs decline
MNI gauge shows better sentiment at big, listed companies
China’s fragile economic stabilization looks to be largely intact in June, though strains are showing for small companies, according to the earliest batch of private indicators.
Minxin purchasing managers indexes and Standard Chartered Plc’s indicator for small and medium businesses declined this month. They’re in contrast to a separate survey of executives at bigger, listed companies that showed improving conditions. Rounding out a mixed bag of readings, a measure of sales managers’ sentiment was stable, while a manufacturing gauge that’s based on satellite images showed an improvement for a third month.
As a credit surge from earlier this year wanes, the government is boosting investment to pick up the slack from an indebted private sector that’s proving reluctant to spend. Judging by the indications emerging so far for June, that strategy risks favoring larger, state-owned corporations while private ones miss out on the benefits of government support.
The first official reading for the month comes July 1, with the government’s manufacturing purchasing manager index at this stage forecast to remain steady at 50.1, according to economists surveyed by Bloomberg.
Here’s what the earliest private indicators show:
Minxin’s manufacturing PMI declined to a four-month-low of 43.2 in June from 45.8 in May as companies cited a lack of market demand and difficulties in hiring capable workers. Services also fell, to 42.6 in June from 44.4 in May. Readings below 50 indicate deterioration.
"Economic activity is likely to slow further in June, particularly on the investment side," Zhao Yang, chief China economist at Nomura Holdings Inc. in Hong Kong, wrote in a report after the release.
China Minsheng Banking Corp. and the China Academy of New Supply-side Economics compile the readings from a monthly survey of more than 4,000 companies, 70 percent of which are smaller enterprises.
"Companies are still short of confidence in judging the future trend of the economy," Jia Kang, the director of the academy, said in an e-mailed statement.
Smaller Firm Confidence
Standard Chartered’s Small and Medium Enterprise Confidence Index for China declined to 55.2 from 56 in May. Readings for commercial services, manufacturing and wholesale and retail all declined.
The reading suggests that real activity faced a setback in the past two months, Shen Lan and Judy Zhu at the bank wrote in a statement. "The demand boost provided by policy stimulus after the Lunar New Year has gradually normalized," the analysts wrote. "Credit conditions have turned less favorable for SMEs, with financing costs continuing to rise."
Market News International’s business confidence indicator showed positive movement at the largest companies. The gauge rose to 54.5, the highest since October, from 50 in May.
“June’s pickup in business sentiment could be a sign that the more expansive policies adopted by the authorities since the beginning of the year are starting to feed through more prominently," Philip Uglow, chief economist of MNI Indicators, said in a statement.
The relatively volatile indicator is based on a survey that includes around 200 companies listed on either the Shanghai or Shenzhen stock exchanges.
The devil may be in the details, though, as sub-indexes in the report showed that production and demand remain sluggish.
The confidence of sales managers remains steady, with an index released by London-based research firm World Economics Ltd. holding at 51.6 for June, after rising for two consecutive months from a record low in March.
Even so, Chief Executive Ed Jones wrote in a statement that "recent expectations that the Chinese GDP growth rate is picking up significantly after a two-year decline may be premature."
The China Satellite Manufacturing Index posted a third monthly gain. The gauge edged up to 48.45 from 48.31 in May, according to San Francisco-based SpaceKnow Inc.
That’s still below 50, the line that separates improvement and deterioration.
The indicator is based on analysis of thousands of industrial facilities using commercial satellite imagery.
More private readings are on their way. Baidu Inc., which handles over 70 percent of the nation’s internet searches and collects data from its more than 600 million users, will soon roll out its own jobless rate, consumer spending gauge and other indicators to shed light on the $10 trillion economy. The technology giant has already produced a monthly index of small and medium enterprises based on search interests.
— With assistance by Xiaoqing Pi