Fri, May 25, 2012 - Page 10 News List

Manufacturing in China slows

MORE EASING:HSBC said China needs more policy easing, given low inflation and faced with economic woes in the key European and US export markets


Chinese manufacturing contracted this month for the seventh consecutive month as exports deteriorated, British banking giant HSBC said yesterday, arguing the data showed the need for more policy easing.

HSBC’s preliminary purchasing managers index (PMI), which measures factory output, fell to 48.7 this month from 49.3 last month, the banking group said in a statement.

A reading above 50 indicates expansion, while a reading below 50 suggests contraction.

HSBC, which will release full-month data on Friday next week, said the worsening picture for the world’s second-biggest economy meant Beijing would have to do more to boost growth, on top of existing infrastructure investment and liquidity easing measures.

“This calls for more aggressive policy easing, as inflation continues to slow. Beijing policymakers have been and will step up easing efforts to stabilize growth,” said HSBC’s chief economist for China, Qu Hongbin (屈宏斌).

“As long as the easing measures filter through, China will secure a soft landing in the coming quarters,” he said.

China’s economy is widely expected to slow this year as woes in key export markets such as Europe and the US hit its overseas sales. The government has set a target of 7.5 percent economic growth this year. China’s economy grew 9.2 percent last year and 10.4 percent in 2010.

“The PMI has been in the 48 to 49 range for several months now, so it’s clear the economy remains on the sluggish side,” said Zhu Haibin (朱海濱), an economist with JPMorgan Chase Bank in Hong Kong.

“But it seems that the policy is now shifting towards pro-growth, and we expect that in the second half, the economy will perform strongly,” he said.

HSBC’s manufacturing figures are typically more pessimistic than China’s official numbers, as the HSBC survey puts more emphasis on smaller companies, which are suffering more in the economic downturn than state-owned giants.

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