Caixin China Manufacturing Purchasing Managers Index (PMI)

Caixin Manufacturing Purchasing Managers Index (PMI) provides an overview of China's manufacturing industry state. The index is calculated based on a survey of purchasing managers from more than 500 large manufacturing companies. Companies are selected based on their contribution to China's GDP, in accordance with the standard industry classification.

The indicator refers to the family of purchasing managers indexes calculated by the international Markit agency. This agency cooperates with Chinese media group Caixin.

PMI is a composite indicator, which comprises five separate subindexes with different weights:

• New orders index — 0,3;
• Production — 0,25;
• Employment — 0,2;
• Supplier deliveries — 0,15;
• Inventories — 0,1.

The survey participants are polled to assess changes in their company: whether the above indicators have improved, worsened or remained unchanged in the past month. The questionnaire for the manufacturing sector contains questions about production, new orders (for the domestic market and exports), unfilled orders, prices paid and received, supplier deliveries, stocks, inventories, employment and estimated near-term production outlook.

Diffuse indexes are compiled based on the survey, and the common manufacturing PMI is calculated using these diffuse indexes in accordance with the above weights.

Separate diffuse subindexes may serve as leading indicators: purchasing managers earlier than others feel changes connected with deliveries, orders and other important economic parameters. Thus, their estimates of the market states come earlier than other statistic values, which are usually calculated after the situation has changed.

Readings above 50 point to a general growth of manufacturing business activity, and readings below 50 indicate a decline. The growth of manufacturing PMI suggests further development of Chinese manufacturing industry. This may affect yuan quotes positively.