Description
China's official manufacturing PMI (purchasing managers' index, an indicator of the economic health of the sector) for October came out over the weekend with a reading of 50.8 (above 50 means expansion). For the past 2 years, the official PMI has been quite steady, hovering between 50 and 51.5. The PMI for non-manufacturing (including services and construction), while higher at 53.8, has been trending down from around 58 three years ago
But a closer look at the manufacturing PMI shows a potentially troublesome situation. While large firms have been steadily growing, the same cannot be said for small and medium size firms (SMEs). The PMI for medium size firms was 49.1, down from 51.4 in May. In fact, as you can see below, medium size firms have only been above 50 nine times in the last twenty-four months. Data for small firms are even more worrying, with an index reading of 48.5. And except for July, small firms have not been in expansionary territory for over two years.
China's Official PMI for Small, Medium, and Large Firms
China's SMEs account for around 80 percent of employment, and they have been the target of many economic policies. But its looking a bit rocky for SMEs in China right now. Although they seem to be getting their fare share of credit, borrowing costs are rising and the economy is slowing, so we may see further measures to assist this area of the economy.
Source: Wind
