(Adds more details on surveys, economists' quotes)
BEIJING, June 3 China's factory and services
sectors had their best showings in months in May as demand
rebounded, surveys showed, fuelling optimism that its economy
may be steadying after a weak start to the year.
"Exports are picking up and the impact of the 'mini
stimulus' is gradually being felt," said Tao Wang, an economist
at UBS, referring to recent government measures to revive
"We expect this to last in the second and third quarters."
The final HSBC/Markit purchasing managers' index (PMI) rose
to 49.4 in May, a four-month high and compared to April's 48.1.
Though the final reading was still under the 50-point level
that separates growth in activity from contraction, the
improvement nonetheless stirred hopes that the economy is
working its way through its prolonged soft patch.
The buoyancy was mirrored by a similar acceleration in
growth in the services sector, where a government-released PMI
climbed to a six-month high of 55.5, from April's 54.8.
The survey results augur well for China's monthly economic
data that will be released from June 8, and gave a fillip to
Asian stock markets.
China's economy has had a bumpy ride this year as an under
whelming run of data showed an extensive cooldown in investment,
retail sales and factory output, feeding concerns that growth
could fall further from an 18-month low seen between January and
Worried that a broadening downturn would cause unemployment
to spike and threaten China's social stability, the government
is trying to bolster growth by pump-priming the economy.
Authorities have hastened infrastructure investment,
accelerated state spending, and twice lowered the reserve
requirements for some banks -- with its most recent reduction
made on Friday.
The measures appear to be working.
"Improving conditions in developed markets and further
targeted loosening measures announced last week should continue
to support the manufacturing sector," said Julian Evans
Pritchard from Capital Economics.
"This should give policymakers more leeway to allow a
greater cooling of the property sector."
NEAR THE BOTTOM?
A breakdown of Tuesday's PMIs showed domestic and foreign
demand is looking up for China.
The services PMI, a barometer for the health of the economy,
showed new orders jumped to an eight-month high of 52.7 in May,
compared to April's 50.8.
Companies also retained their confidence, with business
expectations holding ground at a solid 60.7, compared to April's
In the HSBC PMI poll, a turnaround in an export indicator
was even more dramatic. The new export orders sub-index leapt to
a four-year high of 53.2 in May from April's 48.9
"The economy is stabilising, but it is too early to say that
it has bottomed out, particularly in light of a weaker property
sector," said Qu Hongbin, chief economist for China at HSBC.
Up against slowing sales and less generous funding for
property developers, China's real estate market has softened
this year after last year's stellar performance, causing price
growth to drop an 11-month low in April.
As the sector accounts for over 15 percent of China's annual
economic output and affects production in over 40 industries,
many analysts view the property downturn as one of the biggest
risks to the Chinese growth engine this year.
(Reporting by Koh Gui Qing; Editing by Kim Coghill)