China manufacturing hits 19-month high, HSBC says

UPTURN::Prevailing conditions and continued government policy support should see the economy grow about 8.6 percent this year, an analyst said

AFP, BEIJING

Tue, Jan 01, 2013 - Page 15

China’s manufacturing activity surged to a 19-month high last month, British bank HSBC said yesterday, adding to signs of recovery in the world’s second-largest economy.

The year’s final purchasing managers’ index (PMI) from the lender hit 51.5, up from 50.5 in November when the figure returned to growth after 12 consecutive months of contraction.

A reading above 50 indicates expansion in the key sector, while one below signals shrinkage.

Last month’s reading was also better than a preliminary 50.9 announced earlier in the month and marked the fourth straight month-on-month improvement.

“Such a momentum is likely to be sustained in the coming months when infrastructure construction runs into full speed and property market conditions stabilise,” Qu Hongbin (屈宏斌), HSBC’s chief economist for China, said in the release.

The index, compiled by information services provider Markit and released by HSBC, tracks manufacturing activity and is a closely watched barometer of the health of the economy.

Output at factories expanded for the second straight month last month at the fastest pace in 21 months, while total new orders rose at the fastest clip since January 2011, HSBC said.

China’s strengthening manufacturing sector, and improvements in areas including broader industrial production and retail sales, have spurred optimism that the country’s economic slowdown has bottomed out.

Economic growth hit a more than three-year low of 7.4 percent in the third quarter to September, though data so far for the fourth quarter has led analysts to expect a pick-up.

Qu said that prevailing conditions and continued government policy support should see the economy grow about 8.6 percent this year.

The Chinese government has forecast last year’s economic growth to come in at 7.5 percent, considerably lower than the 9.3 percent recorded in 2011 and 10.4 percent racked up in 2010.

Ren Xianfang (任現芳), economist with IHS Global Insight in Beijing, said the PMI data confirm the “rebound trajectory” of China’s economy.

“Having escaped the hard-landing curse in 2012, the Chinese economy looks to have a better chance delivering a slightly stronger growth in 2013,” she said in an e-mail.

She said infrastructure and housing construction would bolster the economy this year, “while the external sector’s contribution to growth will likely remain minimal or negative.”

Indeed, weakness in the global economy — where Europe is still struggling with its debt crisis and concerns remain over the strength of recovery in the US — is seen as a potential hurdle for China’s recovery.

Exports for November rose just 2.9 percent year-on-year to US$179.4 billion, much lower than market expectations.

New export orders as reflected in last month’s PMI fell slightly, according to HSBC.

“The external environment remains challenging as we enter 2013,” according to a separate analysis by the bank.

“This is reflected not only by the drop in the new export orders readings within the HSBC PMI, but also by fast fading hopes of an effective resolution to the US’s ‘fiscal cliff’ crisis,” the analysis said.

“Moreover, European economic fundamentals remain weak,” it added.

Political leaders in the US are working against today’s deadline to avoid the “fiscal cliff” — a punishing package of spending cuts and tax hikes due to take effect today that could derail the country’s recovery, with knock-on effects globally.