China’s manufacturing boom slowed to a six-month low last month as authorities tightened controls on credit to cool inflation and factories eased output, especially of food and textiles.
The state-affiliated China Federation of Logistics and Purchasing said yesterday that its purchasing managers index, or PMI, dipped to 52.2 last month, from 52.9 in January and 53.9 in December. A weeklong holiday for the Lunar New Year was partly to blame, it said.
Despite declining for three months, the reading has remained above 50, the benchmark for expansion, for two straight years.
A second, competing survey, the HSBC China Manufacturing Purchasing Managers Index, reported a seven-month low reading of 51.7 last month from 54.5 in January.
The reading “confirms that the growth of China’s manufacturing sector is cooling a little,” Qu Hongbin (屈宏斌), HSBC chief economist for China, said in a statement.
“This is a positive development as slower growth is helpful to check inflation, while concerns about a slump in growth are unwarranted,” he said.
The HSBC survey covers 400 companies, while the federation’s monthly reports measure data from 820 companies across a range of industries and is an indicator of future trends.
Consumer inflation rate rose to 4.9 percent in January from 4.6 percent the month before, driven by a 10.3 percent jump in food prices, despite repeated moves to tighten credit. Inflation hit a 28-month high in November, though analysts expect price pressures to continue in the coming months.
“Pressure from inflation is very strong, especially in ... areas affected by a severe drought. This could give rise to speculative price increases for grain crops,” the report said. Surging crude oil prices and loose US credit policies are also adding to China’s inflation troubles, it said.
Meanwhile, an annual survey released yesterday by a major US business group said inflation was one of the biggest concerns for foreign companies operating in booming southern China.
Just over half of about 400 member companies polled by the American Chamber of Commerce in southern China reported that rising prices would have a negative impact on business this year.
“We need to be realistic to accept that costs of labor will go up as there’s competition for labor. That’s a fact of life,” the group’s president, Harley Seyedin, told reporters.
“People should be paid what they should get paid within a competitive atmosphere and the competitive atmosphere right now represents the fact that people need to get paid more and therefore the salaries have been rising,” Seyedin said.
Other worries that topped the poll include uncertainty over Chinese government regulatory issues — a long-running concern — as well as growing competition from local businesses.
Businesses polled were split on the effect of a strengthening yuan, with about 40 percent saying it would have a positive effect on their operations, while about the same amount said it would have a negative effect.
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