China’s manufacturing unexpectedly shrank for the first time in nine months as new orders contracted and output rose at a slower pace, signaling that the slowdown in the world’s second-biggest economy is deepening.
The Purchasing Managers Index fell to 49.2 last month from 50.1 in July, the Chinese National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. Australia & New Zealand Banking Group Ltd. cut its estimate for China’s full-year growth after the report.
Yesterday’s data increase pressure on Chinese Premier Wen Jiabao (溫家寶) to reverse the slowdown ahead of the transfer of power to a new Chinese Communist Party leadership that begins later this year. Record unemployment in the euro area and a jobless rate stuck at more than 8 percent in the US may crimp an export rebound while a slumping corporate earnings, bad debts at banks and property curbs are restraining investment in China.
“The government won’t want to hand over an economy in a hard landing to the next administration, so authorities are likely to become bolder with policy easing, said Liu Li-gang (劉利剛), chief China economist at ANZ in Hong Kong. “They could continue to use tax relief and faster approval of infrastructure investment to instill confidence, but the most effective policy tool in the short term is to aggressively ease the reserve-requirement ratio.”
Liu lowered his growth estimate for this year to 7.8 percent from 8.2 percent and said the risks to the forecast “are biased towards the downside.” He did not give a projection for the third quarter.
The People’s Bank of China cut interest rates in June and July and lowered the reserve-requirement ratio for banks three times starting in November as part of the government’s efforts to support lending and boost growth. The ratio, which is now 20 percent for the biggest banks, has not been reduced since May.
Last month’s PMI reading was lower than the estimates of 24 of the 25 economists in a Bloomberg News survey that had a median forecast of 50.0, the dividing line between expansion and contraction.
A gauge of export orders was unchanged from the previous month at 46.6, marking the third straight contraction. The decline in the new orders index deepened to 48.7 and a measure of output fell to 50.9. All three readings were the lowest since November.
“The index reflects continuing difficulties for the manufacturing sector and without strong supportive policies amid weak global demand, the PMI may drop further,” said Hu Yifan (胡一帆), a Hong Kong-based economist with Haitong International Securities Group (海通國際證券) who previously worked for the World Bank.
A reduction in banks’ reserve requirements “would send a positive signal to the markets to boost confidence particularly now that the PMI has broken the critical mark of 50,” he said.
A separate purchasing managers index released by HSBC Holdings Plc and Markit Economics indicated that manufacturing may have contracted for a 10th month last month, according to a preliminary reading on Aug. 23. The final number for the survey, which covers more than 420 companies and is weighted more toward smaller businesses, is due tomorrow.
The employment gauge in yesterday’s survey was below 50 for a third month and at the lowest level since January, while HSBC’s preliminary reading showed the sixth straight contraction.
The deterioration in labor conditions “could push Beijing to step up policy easing or stimulus in supporting growth,” said Lu Ting (陸挺), chief China economist at Bank of America Corp in Hong Kong.
“In this year of leadership transition, employment and social stability should be of top concern to politicians,” he said.
China’s GDP expanded 7.6 percent in the second quarter from a year earlier, the slowest pace in three years.
Estimates for growth this quarter ranged from 7.4 percent to 8.3 percent in a Bloomberg News survey last month.
Zhang Zhiwei (張智威), Hong Kong-based chief China economist at Nomura Holdings Inc, said he expects a cut in banks’ reserve- requirement ratio this month, probably before the release of the monthly data that will start on Sept. 9 with inflation and industrial output.
The government’s concern that property prices will rebound means interest rates will not be lowered, Zhang said.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”