Mon, Jul 04, 2011 - Page 10 News List

China non-manufacturing industry expansion slows

Bloomberg

China’s non-manufacturing industries expanded at the slowest pace in four months last month, adding to concerns that efforts to tame inflation are curbing growth in the world’s second-biggest economy.

A purchasing managers’ index dropped from 61.9 to 57 in May, the China Federation of Logistics and Purchasing said on its Web site yesterday. A reading above 50 indicates an expansion. A manufacturing index fell last month to the lowest level in 28 months as export orders and output grew at a slower pace, according to a report released by the federation on Friday.

The slowdown in manufacturing “caused a reaction in producer services,” Cai Jin (蔡瑾), the organization’s president, said in yesterday’s statement.

“Although from April it has kept dropping, the index level still shows China’s non-manufacturing industries are maintaining quite quick growth. Affordable housing construction has accelerated,” he said.

The government’s drive to build 10 million low-income housing units this year has increased demand for housing and building industries, Cai said.

The Chinese Communist Party is boosting investment in affordable housing to counter a slump in manufacturing growth. Chinese Premier Wen Jiabao (溫家寶) set a target to build 36 million social housing units over the next five years, according to a Feb. 27 online interview.

The non-manufacturing PMI is based on data from industries including transport, real estate, retailing, catering and software.

Pressure for additional monetary tightening may be easing, after manufacturers’ input prices rose last month at the slowest pace since July last year, according to logistics federation data. Morgan Stanley says inflation may have peaked last month at an estimated 6.2 percent, the highest rate since July 2008.

The central bank has raised reserve requirements 12 times and interest rates four times since the start of last year.

“The risk of a hard landing for China’s economy is small,” Peng Wensheng (彭文生), an economist with China International Capital Corp, said in Beijing on Friday.

Peng sees one or two more interest-rate increases this year.

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