China’s Caixin PMI Edges down to 49.4 in March

by John Galt
May 2, 2016 22:25 ET

The sugar coated version of tonight’s release came from the newspaper Shanghai Daily via Xinhua:

Caixin China manufacturing PMI edges down to 49.4

From the somewhat softened release:

The Caixin General China Manufacturing Purchasing Managers’ Index (PMI), an indicator of manufacturing activity, edged down to 49.4 in April, a private survey showed on Tuesday.

The reading was fractionally down from 49.7 in March, signalling marginal deterioration in operating conditions, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media Co. Ltd.

A reading above 50 indicates expansion, while a reading below 50 represents contraction.

The data came on the heels of the official PMI that showed manufacturing activity expanded for the second month in a row in April.

The official PMI came in at 50.1 last month, slightly down from March’s 50.2 but staying in the expansionary mode for a second month, according to data released by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing on Sunday.

The official PMI samples 3,000 relatively large enterprises in China. The Caixin PMI samples 420 small and medium-sized manufacturing enterprises and is relatively volatile due to its small sample size and the dominance of small enterprises.

The truth? The Caixin PMI is truly a reflection of private corporate manufacturing inside of China as the companies surveyed do not get the privileged access to government sponsored loans and bailouts. Thus this further contraction is probably a more accurate indication of the severity of the economic downturn happening inside of Communist China at this time.

The latest chart of this data via reflects just how long this PMI has remained below the 50 level when average out over the past year plus:


This trend seems to indicate that tests of recent lows, especially considering US and European demand, shall only decrease and accelerate to the downside in the months ahead. If this holds true, the Chinese government has no choice but to depreciate the Reminbi even further to remain competitive in the world marketplace.

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