A private index about China is set to reveal more about its economy

A private index about China is set to reveal more about its economy
A private index about China is set to reveal more about its economy

A closely watched measure of China's economy is expected later on Friday morning as Caixin and IHS Markit release their manufacturing Purchasing Managers' Index (PMI) for the world's second-largest economy.

Economists polled by Reuters expect the Caixin/IHS index to fall slightly to 51.0 in May from 51.1 in April.

A reading above 50 indicates expansion, while a reading below that signals contraction.

On Thursday, China reported that factory activity grew more than expected in May, with the official manufacturing PMI coming in at 51.9 — the highest level since October 2017.

Economic data from China is being closely watched amid trade tensions between Beijing and Washington as President Donald Trump zooms in on America's trade deficit with the world's second-largest economy.

Earlier this week, the White House announced it would have a final list of $50 billion in imports that would be subject to 25 percent tariffs by June 15, and two weeks later would announce investment restrictions on Chinese acquisitions of U.S. technology.

China's official PMI gauge focuses on large companies and state-owned enterprises, while the reading by Caixin and IHS Markit focuses on small and medium-sized enterprises.

Capital Economics senior China economist Julian Evans-Pritchard wrote in a note Thursday that the Caixin/IHS index is a better guide to cyclical trends than the official gauge. He added that the two indices only move in the same direction 60 percent of the time.

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