Within China’s non-manufacturing PMI the services index actually fell -0.4 to 52.3; all the strength came from property (construction index up +3.7pts to 61.9). Within the manufacturing PMI the large (SOE) enterprises were up +0.8 to 52.6, medium-0.7 to 48.2 and small -1.3 to 46.1. So it is a case of stimulus driving the strength; supporting the property market and large SOEs. The small manufacturers are still doing it tough and are likely in trouble due to soft exports, spare capacity, rising labor costs, and less access to credit (vs SOEs who are given ample credit in order to boost the economy). The other interesting statistic is that 6/11 subindexes of the PMI were above 50, the last time they were higher was in March (7/11) at the time of the stimulus rumors and iron ore price spike. So is this a case of the stimulus rumor starting to become fact? Best guess is yes given the strength in construction and large SOEs.
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Bottom line: China’s PMIs basically reflect earlier announced stimulus being transmitted to an economy that still faces structural challenges.