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July 2, 2010

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Home » Business » Manufacturing

Output expands more slowly

CHINA'S manufacturing activity continued to expand at a slower pace in June due to the government's tightening measures amid an industrial restructuring and an uncertain global economic recovery, two key indices showed yesterday.

However, analysts ruled out a possibility of a double-dip and believed the slowdown was steady, which will be positive to support a sustainable economic growth.

The official Purchasing Managers' Index, a comprehensive gauge of industrial activity, eased 1.8 percentage points from a month earlier to 52.1 percent in June, the China Federation of Logistics and Purchasing said.

A reading above 50 points indicates expansion, and it has stood above 50 points for 16 straight months.

The HSBC's index slowed to a 14-month low at 50.4 in June, a dip for the third month.

The official PMI is weighted heavily toward big domestic companies while HSBC's is geared toward privately-owned and export-oriented firms.

The PMI reading provided further evidence that Chinese economy is slowing from a cyclical peak of 11.9 percent in the first quarter as the tightening measures seemed to have taken effect, said Qu Hongbin, chief economist for China at HSBC.

"But fears over a hard landing (for the economy) are overplayed. We expect China to grow around 9 percent in the second half, underpinned by massive ongoing investment and robust private consumption," Qu said.

Ten out of 11 subcomponent indices of the official PMI deteriorated compared with the previous month's reading.

Input prices slid the most as they fell 7.6 percentage points to 51.3 in June due to the decline in global commodity prices amidst concerns about the European debt crisis.

"Declines in input prices may signal that enterprises will face less cost pressures," said Zhang Liqun, a federation analyst.

Indices under the official PMI showed that June's industrial output slowed to 55.8 from 58.2 in May, while new orders eased to 52.1 from 54.8, and new export orders dropped to 51.7 from 53.8. The removal of tax refunds on some high-polluting products and changes in the exchange rate will add to the gloomy outlook for exports.




 

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