Industrial growth slows on back of credit crunch
Print Edition
China’s manufacturing growth slowed to a four-month low in December.
The official Purchasing Managers’ Index, a comprehensive gauge of operating conditions in industrial companies, eased to 51 in December from November’s 51.4, the National Bureau of Statistics and the China Federation of Logistics and Purchasing said yesterday.
A reading above 50 means expansion, but last month’s pace was the slowest since August.
“The fall in the weaker-than-expected official PMI reinforces our view that growth momentum entered a downtrend” in the fourth quarter from a peak in the third,” Nomura International analysts said in a research note.
“The reading came in lower than expected,” said Liu Li-gang, chief economist for China at Australia & New Zealand Banking Group Ltd. “It indicated that real activity could have slowed in the month due to the credit crunch.”
In the middle of last month, an unexpected credit shortage forced the central bank to pump capital into the open market after the stock market tumbled amid fears of a credit crisis.
Zhang Liqun, an analyst appointed by the federation, said seasonal factors, including suspension of manufacturing in some cities to fight this winter’s heavy smog, were also to blame for the slowdown.
The component indexes showed that production growth dropped to 53.9 in December, down from 54.5 a month earlier. New orders also lost 0.3 points to 52 while finished goods inventory decreased to 46.2 from 47.9.
Above official target
Liu said the component indexes indicated that companies remained reluctant to hoard new materials before the new production season, and the slower growth of new orders suggested demand had not fully recovered.
A government report last week suggested China’s economy grew 7.6 percent in 2013, slightly above its official target and just below the 7.7 percent expansion in gross domestic product in 2012 — the worst growth rate for 13 years.
Liu and fellow ANZ group economist Zhou Hao maintained their forecast that China’s economic growth may have slowed to as little as 7.5 percent in the fourth quarter while expecting a figure of 7.6 percent for all of last year.
The Nomura analysts expect growth to slow to 7.6 percent in the fourth quarter before weakening to 7.5 percent in the first three months of 2014 and 7.1 percent in the April-June period.
“We remain concerned about the sustainability of investment by local government financing vehicles and property developers given elevated interest rates,” they added.
Chang Jian, an economist at Barclays, said China still faced fundamental challenges, including industrial overcapacity, mounting local government debt, rising financial risks and the property bubble, which would constrain policy options.
Xue Jun, an economist at Citic Securities Co, said the economy had shown signs of weakness in the past two months.
Profit growth at China’s industrial companies eased sharply in November to 9.7 percent from 15.1 percent in October, mainly due to the slowdown in manufacturing investment, the statistics bureau said last week.
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