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August 2, 2009

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Home » Business » Economy

Factory output growing

CHINESE manufacturing kept a steady pace of expansion in July, reinforcing indications that recovery in the world's third-largest economy is under way.

The official Purchasing Managers Index, a measure of the nation's manufacturing activities, reached 53.3 last month, the China Federation of Logistics and Purchasing reported yesterday.

The PMI hit 53.2 in June and 53.1 in May sustaining a momentum that has been kept above 50 - the threshold indicating an expansion - for five straight months.

"The outcome is in line with our judgment that Chinese manufacturing has seen steady expansion which lays the foundation for recovery in the country's economic growth," said Li Maoyu, an analyst at Changjiang Securities Co.

"Booming domestic demand is a vital force to keep factories busy and the exports may start to gain strength after growth rate in major foreign markets picks up."

China's gross domestic product advanced 7.1 percent on an annual basis in the first half, with the rate reaching 7.9 percent in the second quarter, accelerating from 6.1 percent in the first three months.

Meanwhile, the fall in China's exports eased - from drops of 26.4 percent in May and 22.6 percent in April to 21.4 percent in June.

The country's massive 4-trillion-yuan (US$586 billion) stimulus package has helped boost domestic demand while a moderately loose monetary policy has kept manufacturers less worried about their solvency.

"China has reiterated it will stick to the current monetary policy stance and channel loans to the most capital-needed places. It sends an encouraging signal for manufacturers, especially small- and medium-sized enterprises, to expand their business," said Huang Xiangbin, an analyst at Cinda Securities Co.

China's industrial production rose 7 percent year on year in the first half, with the rate gaining 10.7 percent in June thanks to a buoyant domestic market.

Declines in profit at China's industrial companies also moderated for the sixth straight month in June, reflecting the improvement in Chinese factories. The smaller indices under the PMI, including production, new orders and new export orders, all registered a reading above 50.


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