China NBS PMIs Send Mixed Signals: Hang Seng Index Jumps on Services PMI Data

China PMIs Highlight Stimulus Effects as World Bank Updates Growth Forecast

The Chinese economy was in the spotlight on Tuesday, December 31, as investors evaluated the effectiveness of recent stimulus measures.

China’s NBS Manufacturing PMI unexpectedly fell from 50.3 in November to 50.1 in December. In contrast, the NBS Non-Manufacturing PMI rose to 52.2, up from 50.0 in November.

World Bank Growth Projections Aligned with Beijing’s Measures

December’s PMI figures suggest that Beijing’s recent stimulus measures are beginning to take hold, aligning with the World Bank’s revised growth projections. The World Bank now projects China’s economy to expand by 4.9% in 2024, up from June’s 4.8% estimate.

While the World Bank’s revised 2024 forecast aligns with Beijing’s measures, the 2025 growth projection of 4.5% remains below Beijing’s 5% target.

The World Bank adjusted its growth forecasts based on recent trade terms and Beijing’s fiscal policy measures. Nevertheless, the Bank warned of lingering challenges, including the housing market and consumer wage growth.

Addressing domestic consumption could be crucial as US tariffs and a potential US-China trade war loom. In December, Beijing announced stimulus measures targeting consumption and broader domestic demand.

These measures may counter the impact of US tariffs on China’s economy and PMI trends. As the second largest economy, an improving macroeconomic environment may be crucial for export-driven economies, including Australia and the Eurozone.

The Hang Seng Reaction to the NBS Manufacturing PMI

Ahead of the PMI release, the Hang Seng Index declined to a low of 20,003.

However, the PMI figures boosted demand for Hong Kong-listed stocks, driving the Hang Seng Index to a morning high of 20,127.

On Tuesday, December 31, the Hang Seng Index was up 0.26% to 20,093.

Markets reacted positively to the release of the higher-than-expected Non-Manufacturing PMI. The services sector contributes over 50% to China’s GDP, giving it more weight than the manufacturing sector.

Looking ahead, all eyes will be on China’s Caixin Manufacturing PMI, set for release on Thursday. With the Hang Seng Index up 18% year-to-date and poised to break a four-year losing streak, December’s data could set the tone for a strong start in 2025.