Caixin Insight: Reason for Optimism despite Low PMI Figure

The preliminary Caixin China Purchasing Managers' Index for September stood at 47, slightly lower than the reading for August. This indicates that the nation's manufacturing industry has reached a crucial stage in its structural transformation. Three points are worth particular attention.

The first is that the preliminary readings for the output and new orders sub-indexes were still below the 50-point level that separates business expansion from contraction in September. The continued fall of the output sub-index is the main reason why the PMI could not recover in a short term. But the new orders category fell only marginally month-on-month, ending a streak of accelerating decreases since June. This means the output contracted mainly because of short-term factors and may recover in the future.