The China Manufacturing Purchasing Managers' Index (PMI), which tracks economic activity in China's manufacturing sector each month, has stayed above 50 percent for 19 consecutive months since it was launched in January 2005.

The continuing high position of the index suggests that in general enterprises are optimistic about the future and the macro economy, said Zhang Liqun, a researcher with the Development and Research Center of the State Council.

However, according to the latest statistics from the China Federation of Logistics & Purchasing (CFLP), the PMI dropped 1.7 percentage points in July to 52.4 percent. The drop reflects companies' concerns about future cost rises and about the possible effects of macro-economic regulation on demand, he said

The index is jointly compiled by CFLP and the National Bureau of Statistics (NBS). Generally speaking, a PMI reading above 50 percent indicates an overall expansion in the industry, and a reading below 50 shows an overall contraction.

Every month questionnaires are sent to over 700 manufacturing companies all over China. The companies' responses about their purchasing activities and supply situations are fed into the index.

The index, based on an internationally standardized methodology, is a good indication of the prevailing direction and scope of economic change, according to index compilers.

Source: Xinhua