Analysts seek easing as factory index falls anew
By Wang Yanlin |
December 31, 2011, Saturday
|
Print Edition
Print Edition
CHINA'S manufacturing activity shrank for a second month in December but showed signs of improvement, a survey reported yesterday.
Considering difficult times ahead, analysts called for more aggressive easing of policies to support manufacturers.
The HSBC China Manufacturing Purchasing Managers' Index, a composite indicator to reflect operating conditions in the manufacturing sector, settled at 48.7 in December, up from 47.7 a month earlier. But it still signaled a deterioration in industrial business conditions as a reading below 50 means contraction.
"While the pace of slowdown is stabilizing somewhat, weakening external demand is starting to bite," said Qu Hongbin, chief economist for China at HSBC.
According to the survey, new export business fell during December, ending a two-month period of growth. Survey participants said it linked closely with sluggish demand from external clients, especially from Europe. That led to a "solid reduction" in new orders.
Meanwhile, manufacturers reported a slight cut in workforce numbers, the first decrease since September.
"This, plus the ongoing property market corrections, adds to calls for more aggressive action on both fiscal and monetary fronts to stabilize growth and jobs, especially with prices easing rapidly," Qu said.
The gloomy export outlook was cited repeatedly as a major reason for China's economic slowdown. In November, China's exports grew at the slowest pace in nine months amid deepening eurozone woes, and analysts expected it may continue to deteriorate.
As a result, China's manufacturing sector was weakening. Profit growth among industrial companies moderated to 24.4 percent annually in the first 11 months, down from 25.3 percent between January and October.
China has relaxed monetary policies a bit. The central bank allowed banks to put aside less capital as reserves earlier this month, and it ordered lenders to give more financial support to small and medium-sized companies.
"It seems more policy fine-tuning is needed if the government wants to bolster the industrial sector, the real backbone of China's economy," said Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd.
He expects another cut in reserve requirements early next year.
The official Purchasing Managers' Index for December, from the China Federation of Logistics and Purchasing, will be released on Sunday.
The official PMI is weighted heavily toward big domestic companies.
Considering difficult times ahead, analysts called for more aggressive easing of policies to support manufacturers.
The HSBC China Manufacturing Purchasing Managers' Index, a composite indicator to reflect operating conditions in the manufacturing sector, settled at 48.7 in December, up from 47.7 a month earlier. But it still signaled a deterioration in industrial business conditions as a reading below 50 means contraction.
"While the pace of slowdown is stabilizing somewhat, weakening external demand is starting to bite," said Qu Hongbin, chief economist for China at HSBC.
According to the survey, new export business fell during December, ending a two-month period of growth. Survey participants said it linked closely with sluggish demand from external clients, especially from Europe. That led to a "solid reduction" in new orders.
Meanwhile, manufacturers reported a slight cut in workforce numbers, the first decrease since September.
"This, plus the ongoing property market corrections, adds to calls for more aggressive action on both fiscal and monetary fronts to stabilize growth and jobs, especially with prices easing rapidly," Qu said.
The gloomy export outlook was cited repeatedly as a major reason for China's economic slowdown. In November, China's exports grew at the slowest pace in nine months amid deepening eurozone woes, and analysts expected it may continue to deteriorate.
As a result, China's manufacturing sector was weakening. Profit growth among industrial companies moderated to 24.4 percent annually in the first 11 months, down from 25.3 percent between January and October.
China has relaxed monetary policies a bit. The central bank allowed banks to put aside less capital as reserves earlier this month, and it ordered lenders to give more financial support to small and medium-sized companies.
"It seems more policy fine-tuning is needed if the government wants to bolster the industrial sector, the real backbone of China's economy," said Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd.
He expects another cut in reserve requirements early next year.
The official Purchasing Managers' Index for December, from the China Federation of Logistics and Purchasing, will be released on Sunday.
The official PMI is weighted heavily toward big domestic companies.
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