China's Manufacturing Sector Still Growing Despite Slowdown in 2011

MAPI forecasts 8.4% growth in 2012 and 8.6% in 2013.

Economic growth in China's decelerated in 2011, primarily because of tightened monetary policy through mid-2011 and by the intensifying external headwinds from Europe, Japan, and the U.S. according to a new report from the Manufacturers Alliance for Productivity and Innovation (MAPI).

The group sees the predominant risk to Chinas 2012 growth coming from a potential global recession, but the slowdown will likely be muted because of relatively robust domestic demand.

"Over the past several years, China's reliance on exports as a growth engine has gradually fallen," said economist Yingying Xu, Ph.D. "However, the external demand from the EU, Japan, and the U.S. still has significant implications for China since those countries represent more than 44% of the countrys total exports.

"Despite any pessimistic outlook for exports, domestic demand may remain buoyant, with private consumption growth supported by rising wages, income tax cuts, and subdued inflation, while manufacturing investment is catalyzed by the development of strategic emerging industries targeted in Chinas 12th five-year plan," Xu added.

Chinas economy grew 9.2% in 2011 and consensus forecasts are for 8.4% growth in 2012 and 8.6% growth in 2013.

MAPI predicts that final 2011 manufacturing sales revenue growth will be 26%. This will precede a pronounced moderation to 16% in 2012 before a slight rebound to 19% in 2013.

Wood products are expected to show the most growth in 2012 and 2013, at 40% and 41%, respectively. Machinery and equipment sales revenue is anticipated to grow by 25% in 2012 and by 26% in 2013, followed by nonmetallic minerals at 24% and 21%, respectively.

"Overall consumer spending was relatively stable in 2011," Xu noted. "Manufacturing of nondurable consumer goods remained robust while durable goods were impacted by the gradual exit of the fiscal and tax supports stimulating consumption. Domestic demand, especially in fixed asset investment, continued to be the growth driver for the manufacturing industry."

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