The latest purchasing managers indices (PMIs) relating to China, India and other economies in the Far East were released this morning. The reports were good and bad. But, for our money, some really good news lurks within the depths of the latest survey from China.

Bear in mind that for a PMI, any score over 50 is meant to denote growth. Back in the summer the PMI from HSBC/Markit covering China fell below 50, suggesting the economy behind the Great Wall was perilously close to recession. Well, fears of Chinese recession seem to be over. There are in fact two PMIs covering Chinese manufacturing: the official index, which rose to 54.7 from 53.8, and the PMI from HSBC and Markit, which hit 54.8. More to the point, the latter index stood at just 52.9 in the previous month, and was of course below 50 a couple of months before that. So that’s quite a turnaround. Actually, it was more than quite a turnaround. According to HSBC, the rise was “one of the largest month-on-month rises in the PMI since the start of the series in April 2004.”

So, Chinese manufacturing is booming again. Things are back on course in India, too, where the PMI there hit 57.2, compared to just 55.1 in August.

And yet while the good times seem to be returning to India and China, the stories from Taiwan, South Korea and Japan seem decidedly miserable. The PMI from Taiwan has been below 50 for three months in a row now, and the indices covering Japan and South Korea have both been below 50 for two months in succession. In other words, the evidence is looking pretty overwhelming that manufacturing in these three economies is in recession.

So, this all begs the question, why are India and China doing so well?

Well, it all boils down to internal demand, which is why the reports are so promising.

Qu Hongbin, Chief Economist for China at HSBC, explained it thus: “Another upbeat reading for the HSBC China Manufacturing PMI suggests the strong growth momentum in domestic demand to warrant around 9 per cent growth in [Q4], despite the still-soft increase in new export orders.”

In other words, China’s exports are stalling, just like they are across the water in Taiwan, across an even wider stretch of water in Japan, and also in South Korea. But in China, consumer demand is picking up where exports are falling.

This is good news for China, because, as all regular readers will know, she needs to see the economy adjust from being investment and export led, to becoming consumption led. It is also good news for Western exporters desperate to sell more to the Middle Kingdom. This development is also consistent with news coming out of China all year. What with rising Chinese wages, and various statements from leading figures in China who have acknowledged the need for the economy to re-adjust.

As for India, well, she never did have China’s problem of over reliance on exports. Her consumer society is growing, and as a result manufacturing surges even when export markets are weak.

By contrast, both Japan and South Korea have a huge demographic challenge as their respective populations age fast, leading to higher saving and less consumer demand.

See: Chinese imports outstrip exports

China’s exports boom, as experts predict consumer revolution

At last, Chinese wages rise: is this the end of bubbles?

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