(Reuters) – China’s factory growth stabilised in November aided by firm demand, a pair of surveys showed, a sign of resilience in the world’s second-largest economy that augurs well for its plans for structural reforms.

The final HSBC/Markit Purchasing Managers’ Index (PMI) stood at 50.8 in November, a survey showed on Monday, down a touch from October’s 50.9 but up from a preliminary reading of 50.4.

The encouraging outcome echoes an upbeat showing from the official PMI, which clung to an 18-month high of 51.4 in November, ahead of market expectations.

The upbeat results supported the Australian dollar — a proxy for the Chinese growth engine — in early Asian trade and heartened investors who worried that China’s economic growth may slip in the fourth quarter.

Qu Hongbin, an economist at HSBC, said the final HSBC PMI was revised up from its preliminary reading after firms reported more business, but said spots of weakness in the PMI poll should prevent China from tightening monetary policy.

“The renewed contraction of employment and the slower pace of restocking activities call for a continuation of accommodative policy,” he said.

With the economy growing at a rate of over seven percent and house prices clinging stubbornly to record highs, China’s leaders have signalled lately that policy may be tightened slightly to temper price pressures.

The latest PMI surveys showed China’s economic growth remained resilient in November.

A sub-index for new orders, a measure of domestic and foreign demand, hit an eight-month high of 51.7 in November in the final HSBC PMI.

New export orders fared less well and dipped to a three-month low, but stayed above the 50-point threshold separating growth from contraction. That suggested domestic consumption had picked up some slack from soft foreign demand.

The official PMI released over the weekend also showed new orders and export orders held firm in November, though export orders displayed slightly more strength.


After three decades of double-digit growth, analysts say China’s economy has reached a turning point where traditional growth drivers of heavy investment and brisk export sales must make way for a more sustainable expansion in consumption.

Beijing has made it clear it would like to start the required changes.

China’s top leadership unveiled the boldest economic and social reforms in nearly three decades last month that are expected to give the Chinese economy new drivers of growth.

A Reuters poll in October showed China’s economy is forecast to grow 7.5 percent in the fourth quarter, in line with the government’s 2013 growth forecast, but down from 7.8 percent between July and September.

For the year, economists believe growth may hit 7.6 percent, impressive by world standards, but still the worst for China in 14 years.

“The benign economic outlook in the near term provides favorable condition for structural reforms,” Haibin Zhu, an economist with JPMorgan, said on Monday.

“In the next three to six months, financial reform may make further progress to illustrate the determination for structural reform by new leaders,” he said.

Possible reforms include a widening of the yuan’s trading band, approval of privately-owned banks and an introduction of deposit insurance and certificates of deposit, Zhu said.

(Reporting by Aileen Wang and Jonathan Standing)