Accurately Measure Chinas Growth with the Caixin PMI

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China’s official economic statistics are notoriously unreliable. According to many economists, bankers, and analysts, the country’s statistics bureau routinely smooths data by underestimating growth during economic booms and overestimating it during downturns. It’s difficult to prove these suspicions given the government’s opaque systems, but international investors should not rely exclusively on these statistics when making decisions.

The good news is that there are several economic indicators that are difficult to exaggerate or privately maintained that international investors can rely on for their analysis. For example, Baidu maintains its SME Index, power companies report electricity usage, and railway transportation companies may report on freight throughput. Investors might also take a look at regional economic performance and exports to get an idea of the economy’s strength.

In this article, we’ll take a look at another one of these private indicators – the China’s Caixin PMI – and why it may be one of the country’s most accurate economic indicators. The chart below shows the Caixin Manufacturing PMI from 2010 through today.


The Purchasing Managers Index – or PMI – is a popular way to measure economic growth through surveys of the private sector. These surveys ask business owners questions about new orders, factory output, employment, delivery times, and inventories. Responses to these questions are then weighted and a reading of zero to 100 is calculated, where any reading below 50.0 suggests that the economy is contracting and vice versa.

International investors rely on PMI as a leading economic indicator. After all, the responses to these questions often pre-date actual reported changes in new orders or employment. Readings above 42.0 tend to suggest economic expansion on a gross domestic product (GDP) level, while readings below 42.0 may predict an economic contraction on that level. Individual components of the PMI surveys may also be interesting to different groups of people.

There are many different providers of PMI data, but the two most popular are Markit and, in the United States, the Institute of Supply Management – or ISM. For international investors, Markit is the most common provider of this kind of data across different countries.

China’s Two PMIs

There are two different PMI readings from China, including the official government PMI and private readings from companies like Markit. Each of these surveys sources information differently, which means that they aren’t directly comparable to each other. For instance, Markit’s number has greater exposure to small- to medium-sized businesses, while the government’s figure is more all-encompassing and includes larger businesses.

The Markit PMI, known as the Caixin China PMI, is perhaps the most watched private PMI indicator. Since the smaller businesses surveyed are generally less favored by the government, the reading may be a truer measure of the economy in some ways. The Caixin PMI is also completely independent of the Chinese government, which means that there’s no possibility for the numbers to be smoothed as they may be in official figures.

Important Considerations

The Caixin PMI may be more reliable than official PMI readings in China, but investors should still use the indicator in conjunction with others. Even in developed markets like the United States, it would be a mistake to rely solely on a single measure of the economy when making an investment decision. Manufacturing may account for a greater percentage of China’s economy – making PMI readings more impactful – but investors should look at all areas of the economy.

It’s also important to note that the Caixin PMI tends to vary during certain parts of the year. For example, the indicator tends to fall after the Chinese New Year when businesses are shut down. International investors may not want to assign too much weight to this time of the year and instead rely on other economic indicators that may be more telling. Alternatively, they can wait until the following month when the data may be more reliable in telling the story.

Key Takeaways

  • Official Chinese economic statistics are generally unreliable, according to many economists, which makes private statistics highly valuable.
  • The purchasing managers index – or PMI – is a leading economic indicator that investors use to determine where the economy may be headed.
  • China produces an official PMI reading each month, while Markit provides a private reading – and the two tend to tell a different story.
  • Investors should be sure to combine the PMI readings with other analyses to get an accurate picture of where the economy may be headed.