Economics: Why China Is Doing Better Than The Media Tell You

(Drivebycuriosity) - There is much ado about China´s cooling economy. This week the headlines focused on China´s manufacturing indices. On Sunday the Chinese government published her manufacturing index (NBS Manufacturing PMI)  and on Wednesday followed the media company Caixin with her own version (China General Manufacturing PMI). Both indices dropped and indicated that Chinas´s manufacturing is shrinking and Bloomberg, Reuters &  Co. rang the China recession bell (Chart 1 & 2).

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But the manufacturing indices show just on side of the picture. On Sunday the government also published the non-manufacturing index (Non-Manufacturing PMI ), which represents China´s service sector, and in the night to Friday Caixin followed with their service service index  (China Gteteneral Services PMI). Both indices rose and indicate a stronger growth of China`s service sector  - but they didn`t get much attention  (Chart 3 & 4).

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The services sector accounts for more than half of the Chinese economy and is therefore more important than manufacturing (like in the US).  In the night to Friday Caixin also published their Caixin China General Composite PMI , which adds both indices together. This index also rose and indicates that China´s economy is even getting a bit stronger (Chart 5). Chart 6 - the Caixin China General Composite PMI since 2014 - doesn`t show any slowdown of the Chinese economy!

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The recent economic numbers - weaker manufacturing compensated by stronger services - fit to China´s transformation process. Until recently China`s economy was based on manufacturing and exports to the rest of the world. But the huge country is growing up and entered another stage of the transformation process. Now they are changing from an industrial country - which relies on exports - into a modern economy like the US which is dominated by services and focuses mostly on the domestic market. The media - including Bloomberg & New York Times - paint a biased and too negative picture of China`s economy.

PS For illustration I used an image from the China Fashion Week in Bejing 2017 displaying creations by designer Tom Dong as a symbol for China`s modernization  (xinhuanet).