- Title: CHINA: China manufacturing survey signals growth to stay soft.
- Date: 3rd September 2012
- Summary: SHANGHAI, CHINA (FILE) (REUTERS) VARIOUS OF WORKERS WORKING AT ELECTRONICS FACTORY
- Embargoed: 18th September 2012 13:00
- Location: Hong Kong, China
- Country: Hong Kong
- Topics: Economy,Politics
- Reuters ID: LVAWNJHNLZ84H7RN3K10G4MD2LM
- Aspect Ratio:
- Story Text: China's vast manufacturing sector has been badly hit by slowing new orders, two complementary surveys showed, a sign that the pace of growth in the world's second-largest economy will weaken well into the third quarter.
The final reading of the HSBC China manufacturing purchasing managers' index (PMI) for August fell to a seasonally adjusted 47.6, its lowest level since March 2009, down from 49.3 in July and slightly below a flash reading of the index late last month.
It followed China's official factory purchasing managers' index (PMI) - one of the early indicators of the state of the economy - which fell to a lower-than-expected 49.2 in August, the National Bureau of Statistics said on Saturday (September 1).
It was the first time since November 2011 that the official PMI had fallen below 50, which separates expansion from contraction. Economists polled by Reuters last week had expected it to slip to 50 from 50.1 in July.
The HSBC PMI though has been below 50 for 10 straight months.
"It really means the Chinese economy continues its downward trend. We tried to argue many months ago, without meaningful policy easing, the economic slowdown cannot be reversed. So in that sense it is in line with our view. Of course the policy easing has been lagging behind our expectations so in that sense again the GDP growth number could be weaker than our forecast. We are looking at 7.8 percent GDP growth in the third quarter at best and maybe the GDP growth in the third quarter year-on-year will be flattish," said Hong Kong based economist Shen Minggao, who is also head of China Research of Citi.
A raft of weaker-than-expected data in July had already cooled market expectations for any quick economic recovery in China. The central bank emphasises a "prudent" policy stance for fear of re-igniting property and inflation risks, but analysts believe it may still take incremental steps to loosen.
Thus far, and in contrast to heavy job cuts during the 2008 global economic crisis, employment has held up reasonably well, assuaging fears of social unrest in a politically sensitive year and allowing planners to hold off on aggressive stimulus measures.
"In the very near term, I think the key word is stabilisation. So any measures that will help stablise the economy, avoid social unrest will be taken. But you know, promoting consumption or services are deemed longer term measures. So in the very near term, they have to go back to the traditional growth engines, for example exports, one, infrastructure investment, which is already accelerating, and the property sector, which will be a bit more difficult because the property price is rising but property investment is still falling," said Shen.
China cut interest rates in June and July and has been injecting cash into money markets to ease credit conditions.
The latest data raises doubts as to whether Beijing has done enough to stop the slowdown from extending to a seventh quarter, so analysts believe it will take further steps to try to lift the economy.
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