Manufacturing activity in China contracted for the third straight month this month, early data released yesterday showed, as turbulence in the US and Europe hurt demand for exports.
The HSBC preliminary purchasing managers’ index (PMI) fell to a two-month low of 49.4 this month from a final reading of 49.9 last month, the British banking giant said in a statement.
A reading above 50 indicates the sector is expanding, while a reading below 50 suggests contraction. The gauge stood at 49.3 in July, which was the lowest level in 28 months and the first contraction in a year.
New export orders contracted at a faster pace this month than last month, the statement said, amid deepening economic woes in the US and Europe.
However, despite the deterioration in the manufacturing sector, which employs millions of people and is a major driver of growth, HSBC chief economist Qu Hongbin (屈宏斌) said concerns of a hard landing in China were “unwarranted.”
“Resilient domestic demand is sufficient to support around 8.5-9 percent growth in the coming quarters,” Qu said in the statement.
China’s economy expanded 9.5 percent year-on-year in the second quarter of this year, slower than the 9.7 percent posted in the first quarter and 9.8 percent in the fourth quarter of last year.
The PMI figures also showed input prices, a measure of the cost of raw materials, rose at a faster pace this month, complicating Beijing’s efforts to rein in inflation.
Thus month’s reading is subject to revision when the bank publishes its final figures on Sept. 30.
BANKS LOSING DEPOSITS
Deposits are flowing out of China’s major state-owned banks as high inflation and low interest rates prompt savers to seek better returns in the private lending market, state media yesterday.
Outstanding deposits at the four biggest banks — Industrial & Commercial Bank of China, China Construction Bank, Bank of China and Agricultural Bank of China — fell 420 billion yuan (US$65.7 billion) in the first 15 days of this month, the China Securities Journal said, citing unnamed sources.
Much of the funds likely flowed into the private lending market, which offers borrowing rates about 10 times higher than the official deposit rates and has become increasingly popular as officials tighten restrictions on bank lending, the report said.