(Repeats to wider distribution)
* May official PMI at 50.8, a 5-month high
* New orders grew fastest since last November
* Adds to signs of stabilisation in economy
By Aileen Wang and Matthew Miller
BEIJING, June 1 China's factory activity
expanded at the fastest pace in five months in May due to rising
new orders, official data showed on Sunday, reinforcing views
that the world's second-largest economy is regaining momentum in
the second quarter following Beijing's targeted measures to
The official Purchasing Managers' Index rose to 50.8 in May
from April's 50.4, the National Bureau of Statistics said on
Sunday, beating market expectations of 50.6.
"The PMI reading continued to improve in May, indicating
that a trend of economic stabilization is becoming more
evident," Zhang Liqun, a researcher at the Development Research
Centre said in the statement accompanying the data.
As one of the first leading indicators gauging economic
momentum, the improved reading could bode well for other May
data, bolstering market expectations that the economy is
regaining some strength as the government's pro-growth measures
started to kick in.
The official survey showed a broad-based recovery in
manufacturing activity in May, with nine out of the 13
sub-indicies pointing to improvement from the previous month.
A sub-index for new orders, a measure of foreign and
domestic demand edged up to 52.3 in May from 51.2 in April,
marking the highest level since last November.
The PMI data also showed export orders inched higher to 49.3
in May from 49.1 in April, though the indicator remained below
the 50-level threshold that separates growth from contraction.
Beijing stepped up policy fine-tuning in recent weeks and
has unveiled a slew of targeted measures this year to help shore
up the economy, which has dipped to a 18-month low in the first
quarter and is seen on track to post the weakest annual showing
in 24 years.
"It is clear that the government has become more concerned
about the continued economic slowdown and wants to further
increase the strength of policy support," said Wang Tao,
economist at UBS in a note to clients.
China's cabinet announced fresh easing measures on Friday to
help lower funding costs and reduce operating burdens for
companies to give more support for the real economy.
The measures included lowering the reserve requirement for
more banks, increasing the scale of re-lending and bond
financing to support smaller firms, and a further reduction of
administrative fees for businesses.
China's finance ministry had also urged their local branches
to quicken the pace of budget allocation to guarantee the
completion of key projects and lift the slowing
Those policy moves, together with the earlier steps, such as
hastening construction of railways and public housing, tax cuts
for smaller enterprises, have combined to give a boost to the
economy, though officials and economists warned that the
downside pressure still exists.
Chinese leaders have ruled out the possibility of any big
fiscal stimulus to spur economic growth as they tolerate a
slower growth rate while pushing ahead with structural reforms.
China has set an annual target for the economy to grow about
7.5 percent in 2014 and a Reuters poll found that economists
expected growth of 7.3 percent for this year.
A preliminary HSBC/Markit PMI issued late last month showed
the factory sector turning in its best performance in five
months, although the reading remained below the 50-point level
that suggests contraction in manufacturing
All eyes now will be on the release of the final HSBC PMI at
01:45 GMT on Tuesday, which favours smaller and private
companies compared with the bigger ones captured by the official
(Reporting by Aileen Wang and Matthew Miller; Editing by Matt