Bank's report points to China factory slowdown
By Wang Yanlin |
July 22, 2011, Friday
|
Print Edition
Print Edition
China's manufacturing activities in July contracted for the first time in a year, a preliminary reading of the HSBC Purchasing Managers' Index showed yesterday.
The HSBC Flash PMI, the earliest available indicator of the industrial sector's operating conditions, settled at a 28-month low of 48.9 in July. The low was attributed to tighter monetary policies, higher production costs and dwindling overseas demand.
It fell below the reading of 50 - more than 50 indicates expansion and less than 50 means contraction - for the first time since July 2010. The reading compared with June's final HSBC PMI of 50.1 and 51.6 in May.
"Chinese manufacturing production declined at the fastest rate since March 2010," the bank said in a report, noting key component indices including output, new orders, new orders for export and employment all dropped below 50.
Temporary
Qu Hongbin, chief economist for China at HSBC, said: "This flash PMI suggests slowing momentum in manufacturing, which implies that June's rebound in industrial production was temporary."
Zhu Hongren, a spokesman for the Ministry of Industry and Information Technology, said: "Small and medium companies face huge difficulties to survive nowadays as it is getting harder for them to get credit. There are more reports of SMEs being driven out of the market due to higher production costs and lack of financing."
But Zhu said media reports of a sweeping tide of bankruptcy of SMEs in Zhejiang Province and Guangdong Province were mistaken.
Zhu said the outlook for China's manufacturing would remain relatively stable in the second half of this year, bolstered by still solid economic growth.
China's gross domestic product expanded 9.6 percent from a year earlier in the first six months and the Bank of Communications anticipated a growth rate of 9.5 percent for the whole of 2011.
"Chinese policy-makers won't allow an economic hard landing, and the central bank is unlikely to introduce more interest rate rises this year after three hikes," said Kevin Qiu, a Bank of Communications senior financial analyst.
Such a "normalizing" monetary policy stance would give room for SMEs to make a living, Qiu said.
Meanwhile, in its annual report on China, the International Monetary Fund said the economy was doing well. "China's near-term growth prospects continue to be vigorous and are increasingly self-sustained, underpinned by structural adjustment," the report said.
Xinhua news agency quoted Nigel Chalk, senior advisor in the IMF's Asia and Pacific department and Mission Chief for China, as saying: "We do see the growth is very healthy, and inflation is declining."
Yet, in a separate IMF report, China's trading partners said their biggest concern was that China's economic growth was unsustainable and could lead to a hard landing.
The HSBC Flash PMI, the earliest available indicator of the industrial sector's operating conditions, settled at a 28-month low of 48.9 in July. The low was attributed to tighter monetary policies, higher production costs and dwindling overseas demand.
It fell below the reading of 50 - more than 50 indicates expansion and less than 50 means contraction - for the first time since July 2010. The reading compared with June's final HSBC PMI of 50.1 and 51.6 in May.
"Chinese manufacturing production declined at the fastest rate since March 2010," the bank said in a report, noting key component indices including output, new orders, new orders for export and employment all dropped below 50.
Temporary
Qu Hongbin, chief economist for China at HSBC, said: "This flash PMI suggests slowing momentum in manufacturing, which implies that June's rebound in industrial production was temporary."
Zhu Hongren, a spokesman for the Ministry of Industry and Information Technology, said: "Small and medium companies face huge difficulties to survive nowadays as it is getting harder for them to get credit. There are more reports of SMEs being driven out of the market due to higher production costs and lack of financing."
But Zhu said media reports of a sweeping tide of bankruptcy of SMEs in Zhejiang Province and Guangdong Province were mistaken.
Zhu said the outlook for China's manufacturing would remain relatively stable in the second half of this year, bolstered by still solid economic growth.
China's gross domestic product expanded 9.6 percent from a year earlier in the first six months and the Bank of Communications anticipated a growth rate of 9.5 percent for the whole of 2011.
"Chinese policy-makers won't allow an economic hard landing, and the central bank is unlikely to introduce more interest rate rises this year after three hikes," said Kevin Qiu, a Bank of Communications senior financial analyst.
Such a "normalizing" monetary policy stance would give room for SMEs to make a living, Qiu said.
Meanwhile, in its annual report on China, the International Monetary Fund said the economy was doing well. "China's near-term growth prospects continue to be vigorous and are increasingly self-sustained, underpinned by structural adjustment," the report said.
Xinhua news agency quoted Nigel Chalk, senior advisor in the IMF's Asia and Pacific department and Mission Chief for China, as saying: "We do see the growth is very healthy, and inflation is declining."
Yet, in a separate IMF report, China's trading partners said their biggest concern was that China's economic growth was unsustainable and could lead to a hard landing.
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