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China's official manufacturing index rose to the highest level in seven months as new orders and export demand climbed, underscoring optimism the economy is recovering after a seven-quarter slowdown.
The Purchasing Managers' Index was 50.6 in November, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That compares with the 50.8 median estimate in a Bloomberg News survey of 28 analysts and 50.2 the previous month. A reading above 50 indicates expansion.
Today's report reduces pressure on China's new leadership to roll out more policies to support a growth rebound as they push ahead with overhauling state-owned enterprises and boosting consumption. Confidence in China's economy is at the highest in more than a year amid faith that Xi Jinping's administration will improve the investment climate, a Bloomberg investor poll this week showed.
"It's especially encouraging that the rise in the PMI was mainly driven by new orders, which suggests output will be further boosted in coming months," said Lu Ting, chief Greater China economist at Bank of America Corp in Hong Kong. "Beijing will maintain the current policy stance, which is featured as marginally pro-growth without big-bang stimulus."
Lu said he expects no cut in interest rates and at most one reduction in banks' reserve requirement ratio before the end of the year. He estimates economic growth will accelerate to 7.8 per cent in the fourth quarter from a year earlier after a 7.4 per cent pace in the previous three months, which was the slowest in three years. The preliminary November reading of a separate manufacturing survey from HSBC Holdings Plc and Markit Economics, which focuses more on smaller businesses, showed the first expansion in 13 months. The final figure is due on December 3.
The yuan had its fourth monthly gain, its longest winning streak in more than a year, on signs economic growth is recovering. The currency climbed 0.2 per cent in November to 6.2267 per dollar in Shanghai and on November 27 reached the highest level since China unified official and market exchange rates in 1993.
The federation's PMI is based on responses from purchasing managers at 820 companies in 31 industries. Today's report showed a gauge of new orders expanded for a second month to its highest level since April after contracting for the previous five months, while the output sub-index was the highest in six months at 52.5.
A measure of export orders rose above 50 for the first time since May, with gains boosted by Christmas demand, the federation said in a separate statement.
"Economic growth will continue to maintain a moderate rebound," Zhang Liqun, a senior researcher at the Development Research Center of the State Council, said in the federation's release. The data "indicate that destocking is now shifting to restocking, which means industrial production will continue to ramp up."
Among respondents to the November 27 quarterly global poll of 862 investors, analysts and traders who are Bloomberg subscribers, 72 per cent see the Chinese economy improving or remaining stable, up from 38 per cent in September's survey. Fifty-three percent said they're more optimistic about the effect of Xi's policies on investors, up from 42 per cent who were asked in September about President Hu Jintao.
China's gross domestic product may expand 7.7 per cent in the fourth quarter from a year earlier, the first acceleration in eight quarters, according to the median estimate of 29 analysts in a Bloomberg survey.
Economists have scrapped projections for any easing of monetary policy in the rest of 2012. Analysts surveyed by Bloomberg News November 14-19 see China holding the reserve- requirement ratio for the biggest banks at 20 per cent through the end of the year, based on the median estimate. That compares with the median forecast for a 0.5 per centage-point cut in October's survey.
While China's central bank has refrained from monetary easing since a cut in interest rates in July, the government is making efforts to sustain investment momentum. The top economic- planning agency on November 26 posted approvals on its website for three transport projects with a total value of 75.2 billion yuan ($12.1 billion), expanding potential sales for companies including China CNR Corp and CSR Corp, the country's two biggest train makers.