After three years preparation and pilot works, National Bureau of Statistics of China (NBS) and China Goods Circulation and Purchasing League released Purchasing Manager Index on Manufacturing (PMI) on July 6, 2005 in Beijing. The PMI survey has formally been included in the survey system of NBS, and will be released at the first working day of each month.

PMI is one of international vulgate macro-economic monitoring indicators. It is contained in the area of production and circulation, manufacturing and non-manufacturing. It can play important role in monitoring and forecasting the national economy. There are 22 countries and regions, such as US, UK, Japan and Singapore etc.., which had established PMI survey. The PMI system and its methodology are unified, and therefore are comparable in the world. The establishment of PMI survey in China has great significance in the aspect of macro-economic and industrial economic adjustment, control and forecast, and in the guidance of enterprises’ purchasing, production and operation.

The PMI in June 2005 in China was 51.7 percent. It indicated that China’s manufacturing sector is in the rising phase. It is worth to pay attention that the PMI had continuously decreased for three months since March 2005, from 57.9 percent to 51.7 percent. Although it is still above 50 percent, it is close to the critical point of 50 percent. This may indicate that the growth of manufacturing sector starts to shift into stable situation from uprising one, and may accompanying with small range declining trend. In addition, the main indices composing PMI have different range of decline. The main indicators, such as new order forms, production, exporting order forms, stock, purchasing, purchasing price, and delivering time of suppliers etc.., were in the lowest point since this year. Under the environment which the market supply and demand relationship trends to be in the general balance, and price rising breadth begins to fall, the PMI and its composing indicators indicated that investment expectation of enterprises begins to change. Since the future investment, expenditure and exports still have rather big growth potential, the change of enterprises’ expectation doesn’t mean the economy will slide rapidly, but it will keep stable or small range of fluctuation, therefore it will present high economic growth and low price situation. The enterprises still have big development space, but the competition will trend to be furious.

Among the 20 industries, there are 8 industries’ PMI under 50 percent. They are oil processing and nuclear fuel processing, chemical material and chemical products manufacturing, medicine manufacturing, ferrous metal melt, press and extend processing, metal products manufacturing, special equipment and instrument manufacturing, tobacco manufacturing and non-metal products manufacturing. In terms of enterprises type, the PMI of state enterprise was 47 percent, indicated the evidence of descending of the economy. In view of regions, The PMIs for the east region, middle region and west region were 51.6, 52.7 and 52.9 percent respectively. The PMI for the west region is the highest. This indicated the influences of inclining policies to the middle and west regions. The economic growth in east region was obviously slower than that in middle and west region. The fall of PMI is worthy to pay special attention.

According to introduction, the PMI on manufacturing was jointly worked out through the cooperation of NBS and China Goods Circulation and Purchasing League. The Enterprises Survey Organization (ESO) of NBS was in charge of the collection and processing of the survey data, China Goods Circulation and Purchasing League and China Goods Circulation Information Center were in charge of data analysis, reporting and releasing. The establishment of PMI system was an auspicating work, and as well as a systematic work. In the aspect of PMI survey and methodology, the international vulgate methods were followed, meanwhile the Chinese conditions were considered. In the aspect of survey methods and sample choosing, the PPS sampling method was adopted according to the contribution rate of different sub-sectors to the value-added of manufacturing sector, and totally 727 sampling enterprises were selected, therefore the representativeness of the survey can be ensured. In the aspect of survey and data collection, through the survey channel of ESO/NBS and its special statistical survey team, the reliability and timeliness of data source can be ensured. In the aspect of data analysis, through special topic analysis, and in accordance with the international vulgate method, and with analysis that made by the experts in this area with the PMI survey data, therefore the analytical results are perspective and authoritative.

Mr. Song Yuezheng, the Director-General of ESO/NBS, Mr. Ding Junfa, Vice-Chairman of China Goods Circulation and Purchasing League, and nearly 100 persons from relative parties attended the news conference. 

Background material: Purchasing Manager Index on Manufacturing (PMI)

PMI survey is, in accordance with the standard industrial classification, the manufacturing sector was divided into 20 sub-sectors, and in accordance with the contribution to the GDP of these sub-sectors to determine the sample size, and in accordance with the representativeness of different regions to select the sample enterprises. There 727 sample enterprises were included in the PMI business survey. The survey is carried out monthly through the questionnaire to the purchasing managers of these sample enterprises.

The PMI indicator system includes 11 indices: new order form, production, employment, delivery of suppliers, stock-in-trade, new exporting order form, purchasing, finished product stock, purchasing price, imports, and overstock order form.

The survey result is expressed in percentage. The computing procedure is as follows: Firstly, according to the answers to each survey question (comparison between this month and last month) of the enterprises’ purchasing managers, account the proportions of purchasing managers whose answers is “ascend”, “hold”, or “descend” respectively; secondly, the proportion of “ascend” is endued with the value “1”, the proportion of “hold” is endued with the value “0.5”; the proportion of “descend” is endued with the value “0”; finally, the diffused index of each question will be totalized.

The PMI is an integrated index. The computing method of PMI is unified all over the world, i.e., it is obtained through the weighting of five diffused indices. Such five indices are constituted in accordance with their antecedent influences on the economy. The weight of these indices are as follow: new order form 30 percent, production 25 percent, employment 20 percent, delivery of suppliers 15 percent, stock-in-trade 10 percent. The diffused indices have characteristics of antecedent index, and reflecting the changing trend and changing extent of various aspects of economic activities. If the PMI is above 50 percent, it means that the manufacturing economy is in the status of general expansion; if the PMI is under 50 percent, it means that the manufacturing economy is in the status of generally recession.