Manufacturing PMI hits a two-year high

China's manufacturing purchasing managers index continued rising in November to the highest level in two years, which indicates the country's economic performance is gradually improving, new data showed on Thursday.

The PMI stood at 51.7 in November, up from 51.2 in October, according to the National Bureau of Statistics.

This is the fourth consecutive month that the manufacturing PMI, a key gauge that monitors the activity of large and medium-sized enterprises in the manufacturing sector, stayed above the 50-point mark that distinguishes expansion from contraction in the sector.

Among the five major subindexes, production and new orders stayed in the expansionary range. In November, the production subindex increased to 53.9 from October's 53.3, while the new orders subindex increased to 53.2 from October's 52.8. Both were at the highest level so far this year.

Zhao Qinghe, senior statistician of the NBS, said that production and market demand both rebounded in November, and enterprises showed stronger desire to purchase.

Zhao said the increased costs of raw materials and transportation, which have reached the highest level in three years, are a major challenge for enterprises.

"Fluctuations of the RMB exchange rate have resulted in the increased cost of imported raw materials, which has a significant impact on electronic equipment manufacturing industries such as computers and telecommunication," Zhao added.

The Caixin/Markit Manufacturing PMI, which mainly monitors the market performance of small and medium-sized enterprises, was at 50.9 in November. Although the index stayed in the expansionary range, it declined from 51.2 in October, which shows a slowing expansion pace in the manufacturing sector.

"Caixin/Markit Index readings for both output and new orders declined, but those tracking input and output prices rose at a faster pace to hit their highest levels in five years, pointing to further intensification of inflationary pressure", said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin Insight Group.

"The November PMI indicates that China's domestic economic operation is stable and the positive effect of supply side structural reform is gradually appearing," said Zhang Yiping, an economist with China Merchants Securities. "The quality of China's economic growth is gradually improving."