Welcome Guest   |  Login   |   Signup
JG Logo
Thu, May 24, 2012
Archive Search

Shrinking Manufacturing in China May Mean Slower Economic Growth
February 22, 2012

Share This Page
0
3
0
0
Share with google+ :


Post a comment
Please login to post comment

Comments

Be the first to write your opinion!

China’s manufacturing may shrink for a fourth month in February, indicating the world’s second-biggest economy remains vulnerable to a deeper slowdown as Europe’s crisis caps exports and the housing market cools.

The preliminary 49.7 reading of an index from HSBC Holdings and Markit Economics on Wednesday compared with a final 48.8 in January. A number below 50 points to a contraction. January and February economic data are distorted by a weeklong holiday.

China is cutting banks’ reserve requirements starting on Friday to support an economic expansion that Nomura Holdings estimates may be 7.5 percent this quarter, the least since the global financial crisis.

In Wednesday’s report, a measure of export orders fell, underscoring Commerce Minister Chen Deming’s Feb. 9 caution that the government was not optimistic about the outlook for trade after a decline in shipments in January.

“With a meaningful rebound of domestic demand not in sight, external weakness is starting to bite, adding more downside risks to growth,” said Qu Hongbin, a Hong Kong-based economist for HSBC. The central bank, he added, “should step up policy easing as inflation pressures continue to ease.”

“Although the rate of GDP growth in China is starting to slow, we predict a soft landing with growth around 8 percent this year,” Sam Walsh, the Australia chief executive officer for iron-ore exporter Rio Tinto Group, said in Perth on Tuesday.

Wednesday’s report from China “suggests activities remained weak despite the expected recovery post the Chinese New Year,” said Chang Jian, an economist at Barclays Capital in Hong Kong who formerly worked for the Hong Kong Monetary Authority.

“We expect export growth to halve in 2012 from last year’s pace,” Jian said.

China’s preliminary manufacturing data, called the Flash PMI, is from 85 percent to 90 percent of responses to a survey of more than 400 companies. A separate PMI from the logistics federation and the National Bureau of Statistics, which has a different sample and methodology, showed an expansion in January.

China’s exports and imports fell for the first time in more than two years in January, while home prices failed to rise in any of 70 cities monitored by the statistics bureau.

Economic data in the first two months of each year is distorted by a weeklong Lunar New Year holiday, which was in January this year and February in 2011. Qu cited “quickened production” after the festival as a reason for the gain in the manufacturing gauge from last month.

Bloomberg