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Manufacturing reading gives sign of recovery

Manufacturing in China remained in contraction but the bottom is in sight, analysts said with the release of a rising purchasing managers' index, or PMI, in January.

The PMI, a measure of conditions in the manufacturing industry, rose for the second straight month in January to 45.3 percent from December's 41.2 percent, the China Federation of Logistics and Purchasing said today.

China has announced massive fiscal stimulus packages and sharp interest rate cuts to boost domestic demand and spur consumption to fight against the fallout from global financial turmoil.

Most sub-indices, such as export orders, were still below 50 percent, but they have made notable improvement.

The PMI for input prices rebounded to 41.5 percent in January from 32.7 percent in December, which may help stop the freefall in Producer Price Index. Export orders climbed from 30.7 percent in December to 33.7 percent last month and the imports index rose to 39.9 percent from 33.3 percent.

"This may point to some shrinkage in the trade surplus in coming months, especially as the investment projects may boost import demand," said Ken Peng, an economist from Citigroup.

The index, started in April 2004, is based on a survey of more than 400 manufacturing companies. The survey tracks changes in output, new orders, export orders, employment, inventories, input costs and output prices. A reading above 50 shows an expansion in business activity, below 50 a contraction.


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