Fri, Jan 25, 2013 - Page 15 News List

Manufacturing in China grows to two-year high

Bloomberg

China’s manufacturing is expanding at the fastest rate in two years, according to a private survey of companies, bolstering prospects that economic growth will accelerate for a second straight quarter.

The preliminary reading of a Purchasing Managers’ Index was 51.9 this month, according to a statement from HSBC Holdings PLC and Markit Economics yesterday. That compares with the 51.5 final reading for last month and the 51.7 median estimate of 17 analysts surveyed by Bloomberg News.

The data suggest that China’s expansion at the start of this year will equal or exceed its 7.9 percent clip in the fourth quarter. Sliding Japanese exports and below-forecast growth in South Korea reported yesterday underscore Asian economies’ dependence on China as austerity measures in Europe limit demand.

“Despite the still-tepid external demand, the domestic-driven restocking process is likely to add steam to China’s ongoing recovery in the coming months,” Qu Hongbin (屈宏斌), HSBC’s chief China economist in Hong Kong, said in a statement.

Fan Gang (樊剛), a former adviser to China’s central bank, said in an interview on Wednesday that the risk of the nation’s economy overheating has resurfaced as new regional-government officials try to boost development.

If confirmed in the final reading on Feb. 1 this year, the HSBC gauge would be at the highest level since January 2011. A separate, government-backed purchasing managers’ index is to be released on the same day. The official gauge showed a third month of expansion last month with a reading of 50.6, unchanged from November.

The government has paused from easing monetary policy since July last year after two interest-rate cuts and three reductions in banks’ reserve-requirement ratio. At the same time, authorities have accelerated investment-project approvals, increased infrastructure spending and cut taxes for small businesses to boost domestic demand and support growth.

Economists are scrapping forecasts for the central bank to lower the reserve ratio. The median estimate of 20 analysts in a Bloomberg survey conducted from Thursday last week to Wednesday is for no change in the ratio throughout this year, compared with forecasts of a 0.5 percentage-point cut in last month’s survey.

Analysts maintained projections for an unchanged benchmark lending rate at 6 percent this year. The median economic-growth forecast for this year was also unchanged at 8.1 percent in the Bloomberg survey.

The HSBC index “reinforces our view that GDP growth will pick up further” in the first quarter to 8.2 percent, Zhang Zhiwei (張智威), chief China economist at Nomura Holdings Inc in Hong Kong, said in a note yesterday.

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