China Manufacturing Shows Growth for Second Month

China Manufacturing Shows Growth for Second Month

Dec. 2, 2012
Recent data have fueled optimism that the worst is over as exports, industrial production, retail sales and fixed asset investment have all shown improvement.

BEIJING -- In a further sign of strength in the world's second-biggest economy after a marked slowdown, China's manufacturing activity grew in November for the second month in a row, official data showed Saturday.

The indications of upward momentum were reinforced by a separate survey by British banking giant HSBC that showed growth for the first time in 13 months.

China's purchasing managers' index (PMI) reached 50.6 last month, up from 50.2 in October and 49.8 in September and the highest since hitting 53.3 in April, figures from the National Bureau of Statistics showed. The PMI is a widely watched barometer of the health of China's economy.

The improved data eased recent months' worries of a "hard landing," said IHS senior China economist Alistair Thornton, though he cautioned that risks remained and reforms were needed for long-term growth.

"The fears surrounding that sharp hard landing have been largely averted," he said, while also singling out as dangers an unstable property market and the debt crisis in Europe, a key trade partner for China.

The November figure came in below the 50.8 median forecast of 10 economists surveyed by Dow Jones Newswires. Still, Dow Jones said, the official reading "adds to recent signs of a rebound" and "is likely to further boost market confidence in the Chinese economic outlook for the rest of the year."

Separately, the HSBC said on November 22 that its preliminary PMI reached 50.4 in November, up from a final 49.5 in October and 47.9 in September.

China's manufacturing sector suffered this year given the broader slump in the economy, which has been hit by weaker demand for Chinese products in the crucial markets of Europe and the United States.

Economic Growth Has Been Improving

The country's economic growth hit a more than three-year low of 7.4% in the third quarter from July to September. But recent data have fueled optimism that the worst is over. Exports, industrial production, retail sales and fixed asset investment -- a key gauge of infrastructure spending -- have all shown improvement.

Premier Wen Jiabao and Commerce Minister Chen Deming have both said in recent months that they expect China to achieve its targeted 2012 growth rate of 7.5% despite the impact of the global slowdown.

The rosier outlook comes as China concluded an overhaul of the ruling Communist Party's top leadership in mid-November. Vice President Xi Jinping took charge of the party from President Hu Jintao, whom he is also expected to replace as president in March.

China cut interest rates twice this year and decreased the amount of funds banks must keep in reserve three times since December last year to encourage lending.

It has avoided the type of major initiatives it took after the 2008-2009 global financial crisis, including a government-driven stimulus package worth about half a trillion dollars. But it faces mounting pressure to restructure its economy to ensure long-term growth, such as reducing its reliance on investment and boosting domestic consumption.

"Whilst things are stabilised in the short term -- that means maybe six months, a year even, we don't expect there to be any dramatic slowdown -- the bigger picture remains that the Chinese economy is slowing," said Thornton.

"I think the focus now has been pushed out to assessing how China's going to deal with reform."

Copyright Agence France-Presse, 2012

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