Encouraging signs in Chinese factory data

Last Updated: Thu, Nov 01, 2012 19:50 hrs

Two surveys that take the pulse of China’s manufacturing sector on Thursday buttressed the view that the giant Chinese economy is picking up a little speed after months of deceleration.

The monthly polls — one conducted by the China Federation of Logistics and Purchasing in Beijing, the other released by the bank HSBC — both showed that manufacturing conditions improved in October as the effect of recent stimulus measures and somewhat improved overseas demand began to filter through to companies making anything from furniture and garments to plastic goods.

The official purchasing managers index for October came in at 50.2, rallying above the 50-point mark that separates contraction from expansion for the first time since July.

The HSBC reading, which is more focused on smaller and medium-sized enterprises, rose to an eight-month high of 49.5 points in October, up from 47.9 in September. The reading was also a significant improvement on the preliminary figure of 49.1 that the bank published last week.

Over the past month or so, anecdotal evidence and early data have signaled that Chinese economy may finally have bottomed out. Flagging overseas demand and the delayed effect of measures aimed at cooling inflation and a red-hot property market had caused China’s economy to lose much of its steam this year.

The indexes released Thursday, however, backed up the impression that the economy may enjoy a modest recovery in coming months.

“Overall, this reflects the impact of policy easing that has accelerated since May, including pick-up in infrastructure investment, fiscal expenditure, accommodative liquidity condition and monetary policy stance,” economists at JP Morgan said in a note. A stabilisation in the housing market in recent months also provided support to domestic demand, they added.

However, economists also caution that the Chinese economy is unlikely to bounce back to the kind of growth levels it enjoyed before the global financial crisis.

The World Bank and the International Monetary Fund, for example, forecast that expansion next year will be a little more than 8 per cent — up from just under 8 per cent this year.

Moreover, financial turmoil in Europe and the so-called fiscal cliff in the United States could set back global growth again.

The “fragile external environment,” the JP Morgan team wrote, “remains the most notable risk in the road of economic recovery.”

© 2012 The New York Times News Service

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