Tue, Jul 02, 2013 - Page 15 News List

Low factory growth bodes ill for China

PRIORITIES:Two surveys yesterday showed that the world’s No. 2 economy is slowing, but Beijing seemed unperturbed, saying officials should not chase growth at all costs

Reuters and AFP, BEIJING and SHANGHAI

Growth in China’s vast factory sector slowed to multi-month lows last month on faltering new orders, a pair of surveys showed yesterday, boding ill for the world’s second-largest economy as it continues smarting from fears of a credit crunch.

Economists said the two purchasing managers’ indices (PMIs) reinforced their concerns that China’s economic cool down could deepen in the second quarter, especially with Beijing looking increasingly reluctant to take action to stimulate growth.

“The Chinese economy is still struggling at the bottom,” JPMorgan chief China economist Zhu Haibin (朱海濱) said in Hong Kong.

Zhu said slowing growth in China’s factory sector, as well as tighter monetary conditions in coming months after a squeeze in the interbank market in the past two weeks, could further hobble the Chinese economy this year.

The official PMI slipped to 50.1 last month from May’s 50.8, just a whisker above the 50-point level that indicates growth. The last time the reading fell below 50 was in September last year.

A separate PMI survey, conducted by Markit Group Ltd and sponsored by HSBC Holdings PLC, fell to a nine-month low of 48.2 last month from May’s 49.2.

Yet, China’s leaders appear to be comfortable with the country’s slower pace of growth, with Chinese President Xi Jinping (習近平) saying over the weekend that officials should no longer be lauded as “heroes” if they chase economic growth at all costs.

The surveys showed demand slackening at home and abroad.

New orders in the official PMI survey tumbled to a four-month low of 50.1 last month.

The HSBC/Markit PMI, which focuses on smaller firms and exporters, showed new orders slumped to their lowest level last month since October last year, even though producers had cut prices to improve sales.

The HSBC survey also showed new export orders shrinking last month at their fastest pace since September last year as US and European clients reduced purchases even after Chinese producers passed on cost savings.

Chinese policymakers’ determination to push on with market reforms and the rebalancing of the country’s investment and export-driven economy was highlighted by turmoil in the interbank market in the past two weeks, when the People’s Bank of China let short-term borrowing costs spike to record-highs without immediately injecting liquidity to ease conditions.

China Banking Regulatory Commission Chairman Shang Fulin (尚福林) on Saturday said liquidity in the country’s banking system is sufficient as banks have more than enough reserves to meet settlement needs.

However, the cash crunch will likely further dim China’s economic outlook in the second half, as banks are expected to slow the expansion of imbalanced book lending, while Beijing will probably refrain from stimulus.

The China Index Academy, which is owned by Soufun Holdings Ltd (搜房), China’s largest real-estate Web site operator, yesterday said banks had tightened mortgage lending as a result of the credit crunch.

Home prices in major cities jumped 7.4 percent year-on-year last month, the academy said in a survey. The average cost of new homes in 100 major cities reached 10,258 yuan (US$1,670) per square meter last month, the academy said in a statement.

Last month marked the seventh consecutive month of rises, although the monthly increase of 0.77 percent narrowed slightly from May’s 0.81 percent as banks tightened credit to the property sector due to a liquidity squeeze, the academy said.

This story has been viewed 1865 times.
TOP top