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Small producers outperform big players as global demand slows
By Wang Yanlin |
November 1, 2011, Tuesday
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Online Edition
Online Edition
CHINA'S big manufacturers reported their activities had grown at the slowest pace in almost three years last month while smaller private factories said their performance had improved, two survey revealed today.
The contradiction was a reflection of more agility and better adaptation among private firms amid a deteriorating global economic backdrop, analysts said.
The official Purchasing Managers' Index, a comprehensive gauge of manufacturing activities across the country, scaled back to 50.4 in October from 51.2 a month earlier, said the China Federation of Logistics and Purchasing that compiled the survey on behalf of the National Bureau of Statistics.
The reading came in as the lowest since February 2009 but was still higher than 50 -- a threshold pointing to expanding activities.
"The weaker-than-expected official PMI was driven low by new export orders and the employment index," said Chang Jian, an economist at Barclays Capital. "A further deterioration in external demand could push the official PMI below 50 in the coming months."
In contrast, the HSBC China Manufacturing Purchasing Managers' Index rose at its fastest rate since May and settled at 51 last month -- up from September's 49.9 and reversed a downward trend.
Compared with the official PMI, which is weighted heavily towards big domestic companies, the HSBC survey is slanted more towards privately-owned and export-oriented firms.
"The HSBC PMI confirms the notable improvement in China's manufacturing activities driven by rising new business," said Qu Hongbin, chief economist for China at HSBC.
Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd, said although conditions among private factories had improved, China's manufacturing as a whole called for a policy adjustment supportive of industrial growth.
"The official PMI is more comprehensive and its sharp moderation in October suggested the urgency of policy fine-tuning," Zhou said. He expected the most likely measure would be selective reserve ratio cuts for small and medium-sized banks, which could ease their acute liquidity pressure.
Premier Wen Jiabao said last week that China should fine-tune macroeconomic policies and maintain reasonable credit growth to sustain economic expansion. It indicated the authorities may temporarily stop further tightening and balance liquidity for smaller firms.
"Despite the slight uptick in output price growth, inflation is on track for easing. This provides leeway for China to fine-tune policy to strike a better balance between growth and inflation priorities," Qu said.
The contradiction was a reflection of more agility and better adaptation among private firms amid a deteriorating global economic backdrop, analysts said.
The official Purchasing Managers' Index, a comprehensive gauge of manufacturing activities across the country, scaled back to 50.4 in October from 51.2 a month earlier, said the China Federation of Logistics and Purchasing that compiled the survey on behalf of the National Bureau of Statistics.
The reading came in as the lowest since February 2009 but was still higher than 50 -- a threshold pointing to expanding activities.
"The weaker-than-expected official PMI was driven low by new export orders and the employment index," said Chang Jian, an economist at Barclays Capital. "A further deterioration in external demand could push the official PMI below 50 in the coming months."
In contrast, the HSBC China Manufacturing Purchasing Managers' Index rose at its fastest rate since May and settled at 51 last month -- up from September's 49.9 and reversed a downward trend.
Compared with the official PMI, which is weighted heavily towards big domestic companies, the HSBC survey is slanted more towards privately-owned and export-oriented firms.
"The HSBC PMI confirms the notable improvement in China's manufacturing activities driven by rising new business," said Qu Hongbin, chief economist for China at HSBC.
Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd, said although conditions among private factories had improved, China's manufacturing as a whole called for a policy adjustment supportive of industrial growth.
"The official PMI is more comprehensive and its sharp moderation in October suggested the urgency of policy fine-tuning," Zhou said. He expected the most likely measure would be selective reserve ratio cuts for small and medium-sized banks, which could ease their acute liquidity pressure.
Premier Wen Jiabao said last week that China should fine-tune macroeconomic policies and maintain reasonable credit growth to sustain economic expansion. It indicated the authorities may temporarily stop further tightening and balance liquidity for smaller firms.
"Despite the slight uptick in output price growth, inflation is on track for easing. This provides leeway for China to fine-tune policy to strike a better balance between growth and inflation priorities," Qu said.
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