Chinese Stocks Fall Despite Positive PMI News

Manufacturing activity in China is on the rise according to survey results from the latest Purchasing Managers Index in China. The Purchasing Managers Index (PMI) rose to 51.0 in February, up from 50.5 in January. A score above 50.0 is an indicator of improving economic activity. The official Chinese Purchasing Managers Index of 51.0 was better than the HSBC Flash PMI which rose to 49.7 in February. The official figure is mostly indicative of activity at larger companies, while the HSBC Flash PMI also includes responses from smaller companies and gives a broader picture of Chinese economic activity. Although the results of the official Purchasing Managers Index survey and the HSBC PMI differed slightly, they both showed an upward trend of improving economic performance by the world's second biggest economy. The result should ease some of the concerns of observers who have been worried that China's economic performance could suffer because of events in the European Union. The International Monetary Fund (IMF) warned China earlier this year that the country must work to boost domestic demand because its economy was to dependent on exports. The IMF said that deep recession in the European Union or the United States could cut China's economic growth nearly in half. While the euro zone is being hit by a recession, it is expected to recover by the second half of the year. The economic situation in the United States already seems to be improving following a great deal of positive economic data that has been coming out of the United States. Although today's news that the Purchasing Managers Index continues to edge higher was positive, it may have been overshadowed by Federal Reserve Chairman Ben Bernanke's testimony before the United States Congress. Chairman Bernanke didn't drop any bombshells but neither did he give any indication that the Federal Reserve would undertake another round of quantitative easing any time soon. Bernanke's failure to announce another round of stimulus for the American economy seemed to offset the positive PMI news and China's stocks finished the trading day slightly down. The Shanghai Composite of Chinese traded stocks finished trading down 2.37 points, or 0.10%, at 2,426.11 on Thursday. If the Chinese Purchasing Managers Index (PMI) continues to rise month after month, Chinese stocks could start climbing again.