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Manufacturing remains strong
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China’s manufacturing activity grew at a slower pace in November but remained strong enough to support ongoing economic recovery and planned structural reform, a preliminary survey showed yesterday.
The HSBC Flash China Manufacturing Purchasing Managers’ Index, the earliest available indicator of vitality in the industrial sector, eased to 50.4 in November compared with October’s final figure of 50.9. A reading above 50 means expansion.
The slowdown was largely due to weak new export orders and slowing restocking activities, the survey report said, noting that it was still the second-strongest in seven months.
Qu Hongbin, chief economist for China and co-head of Asian economic research at HSBC, said the latest index implied that growth recovery was still in the process of stabilizing.
“Although slowing a bit, the index remained above the threshold for expansion,” Qu said. “The muted inflationary pressure should enable China to keep policy relatively accommodative to support growth.”
The component indexes showed that new orders moderated to 51 in November from 51.5 last month, and new export orders slid to 49.4 from 51.5. The stock of finished goods declined 0.4 points to 49.8 in November after rising for three consecutive months.
On the positive side, output increased further to 51.3 from 51.1, the highest since April.
Zhu Haibin, chief economist for China at JPMorgan, said economic activity remained strong in the third quarter, though growth momentum eased somewhat in November.
“It appears that the business has turned somewhat cautious after strong recovery in the third quarter, as inventory restocking cooled off modestly,” Zhu said. “The data point to still solid growth outlook in the near term, although the momentum is likely to have peaked in the third quarter.”
China’s gross domestic product growth accelerated to 7.8 percent in the third quarter, up from the second quarter’s 7.5 percent and implying a stabilizing economic recovery.
Zhu said China is likely to maintain a proactive fiscal policy and neutral monetary policy based on recent economic performance, ruling out any immediate change in policy rates and reserve requirement ratios. He expected China’s economy to grow 7.6 percent on an annual basis this year and 7.4 percent in 2014.
The stable economic outlook in the near term provided favorable conditions for the structural reforms set out at a recent key meeting of the Party, said Li Maoyu, an analyst at Changjiang Securities Co.
China plans to let the market play a “decisive” role in resource allocation through reforms in administration, finance, land and resource pricing, according to report released after the meeting.
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