Tue, Dec 02, 2008 - Page 11 News List

China’s manufacturing and export orders drop

‘ANOTHER GRIM MONTH’Export orders, output and new orders all fell as the global financial crisis sapped demand for toys, textiles and computers from China


China’s manufacturing shrank by the most on record and export orders plunged, adding to evidence that recessions in the US, Europe and Japan were dragging down the world’s fastest-growing major economy.

The Purchasing Managers’ Index (PMI) fell to a seasonally adjusted 38.8 last month from 44.6 in October, the China Federation of Logistics and Purchasing (中國物流與採購聯合會) said in an e-mailed statement yesterday.

A second PMI released by CLSA Asia-Pacific Markets also showed a record contraction.

Export orders, output and new orders all shrank by the most since the surveys began as the global financial crisis sapped demand for toys, textiles and computers.

The CSI 300 Index of stocks has fallen 69 percent from a record in October last year.

“Another grim month for China manufacturing,” said Eric Fishwick, head of economic research at CLSA in Singapore. “Export orders will weaken further and we expect further cuts in production and employment.”

The yuan fell 0.3 percent to 6.8549 against the US dollar as of 11:15am in Shanghai, the biggest drop since Oct. 10, as the government sought to help exporters.

The government-backed PMI started in 2005, the CLSA study in 2004.

China’s economy expanded 9 percent in the third quarter from a year earlier, the slowest pace since 2003. This quarter, growth may cool to 4 percent, JPMorgan Chase & Co said.

An export order index dropped to 29 last month from 41.4 in October, the government-backed survey showed. A reading above 50 reflects an expansion, below 50 a contraction.

The output index fell to 35.5 from 44.3, while the index of new orders dropped to 32.3 from 41.7.

The government last month announced a US$586 billion stimulus package and the biggest interest-rate cut in 11 years to revive the economy.

“It’s a very challenging time for policy makers — they definitely need to do more in terms of fiscal and monetary stimulus,” said Wang Qian (王黔), an economist at JPMorgan Chase & Co in Hong Kong. “There will be more aggressive interest-rate cuts.”

A slump in property sales and building work is also undermining growth. Construction of homes, offices and factories contracted at least 16.6 percent in October after a 32.5 percent expansion a year earlier, Macquarie Securities Ltd said.

Baosteel Group Corp (寶鋼集團) is facing its “most difficult” period since the company was founded 30 years ago as output, sales and profits plunge, an executive said last month.

Last week, the World Bank cut its growth forecast for China to 7.5 percent next year from a 9.2 percent estimate in June.

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