In the case of China, concern over its slowing rate of expansion has played a unique role in the worrisome global GDP narrative. China, now the world’s second largest economy and fastest growing major economy, has an enormous influence on global economic performance. So it is with a degree of enthusiasm that investors great the news out of China, released in the overnight, that its official factory gauge closed above 50.0 in April. The manufacturing purchasing managers index was 50.1 for the month – the second consecutive month above 50. Additionally, the non-manufacturing PMI registered a 53.5 for the same period.
This degree of relative stabilization has broad implications – if it is trend worthy. A stabilization in China’s economic performance as measured by manufacturing and non-manufacturing would have ramifications well beyond the Pacific economic region. It would effectively mean the there may be a less immediate need for further stimulus from PBOC and as a result that the concern over China’s slowing growth may pass in the coming months. It would also mean that there may ultimately be support for the yuan at these levels.
Economic stabilization in China would go a long way in assuaging the fear that has gripped markets that the world is headed back into a negative growth cycle.