Chinese Manufacturing Rebounds in March

Price hikes also started to slow in March

After a fall the previous month, manufacturing activity in China rebounded in March official and independent data showed on April 1.

The purchasing managers index (PMI) rose to 53.4 in March from 52.2 in February, after three consecutive months of slowdowns, the China Federation of Logistics and Purchasing (CFLP) said.

And the HSBC China Manufacturing PMI indicated a milder rebound, bouncing back slightly to 51.8 in March from 51.7 in February, the British banking giant said.

Economists said the rebound helped alleviate any concerns about a potential sharp slowdown in the overall economy -- and made it likely that more tightening measures would follow.

"The final March manufacturing PMI confirmed that the pace of manufacturing expansion has stabilized after slowing in February," said Qu Hongbin, HSBC's chief economist for China. "This implies economic growth is only moderating rather than slowing too much. More importantly, price hikes also started to slow in March."

"All these confirm our view that quantitative tightening is working. So as long as Beijing keeps tightening for another three to four months, inflation should start to slow meaningfully in the second half of 2011."

The bank said manufacturers in China still faced greater cost burdens but the rate of growth in factory input costs, which includes raw material and fuel prices, eased markedly from February.

The CFLP said its input price sub-index, an indicator of inflation pressures, eased to 68.3 from 70.1 in February.

"Investment growth remained high in the January-February period, while growth in exports and consumption both declined," CFLP analyst Zhang Liqun said.

Beijing has raised interest rates three times since October and increased the amount banks must hold in reserve three times already this year to control soaring prices, which top leaders fear could lead to social unrest. Consumer inflation remained stubbornly high at 4.9% in February, above Beijing's 2011 target of 4%. The official Shanghai Securities News reported Friday that economists expect it to hit 5% in March.

Copyright Agence France-Presse, 2011

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