Manufacturing Revenue to Grow 19% for China in 2011, Says Industry Group

MAPI says growth in 2001 will ease due to tighter monetary policies and sluggish growth among China's major trading partners.

Despite the slowdown in fixed asset investment and the normalization of monetary policy, China's economy continued to grow at a double-digit pace in 2010, primarily due to the quick recovery of external demand and the robust investment in the real estate sector, according to Manufacturers Alliance/MAPI report.

Growth will ease to a more sustainable pace in 2011 because of tightened monetary policy and sluggish growth among China's major trading partners, explains economist Yingying Xu, Ph.D., author of the study.

"China's growth in 2010 was initially driven by the massive fiscal stimulus plan which focused on government-led infrastructure investment and by an extremely accommodative monetary policy which led to 30% growth in the money supply," Xu said. "However, these key drivers began to change in the second half of 2010. GDP growth declined from 10.6% in the first half to 9.6% in the third quarter before ending at 10.1% for all of 2010."

The report notes that the deceleration in the growth rate was more pronounced in the industrial sector than in the agricultural and service sectors. For 2010, fixed asset investment grew 24% on a year-over-year basis compared with 30% growth in 2009.

MAPI forecasts 9% economic growth in China in 2011. Xu expects that monetary policy will likely remain tight, at least through the first half of 2011. In addition, she sees China's exports, which surged 31% and surpassed the pre-crisis levels in 2010, easing into more moderate expansion in 2011 and the trade surplus, a constant source of friction with Chinas major trading partners from industrialized countries, gradually declining.

MAPI predicts that final total manufacturing sales revenue will show 30% growth in 2010. (The sales revenue growth is a weighted average of the growth rate for the 16 manufacturing industries that MAPI covers.) The group anticipates a 19% growth in 2011.

Most consumer goods manufacturing accelerated its growth pace in 2010, due largely to the rapid recovery of global trade and improved labor market conditions. Rising inflation and the sluggish recovery in industrial countries, however, will impose risk for both domestic and internal demand in 2011.

Wood products are expected to show the most growth in 2011 at 30%, followed by chemicals at 23%, and by motor vehicles and trailers at 22%. The food and beverages, paper, and rubber and plastics industries are all expected to experience 20% growth in 2011.

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