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China's Manufacturing May Contract at Slower Pace This Month, Survey Shows
Aug 24,2011 09:11CST
industry news
Source:SMM
China's Manufacturing May Contract at Slower Pace This Month, Survey Shows.

Aug 23, 2011 (Bloomberg) - China's manufacturing may contract at a slower pace in August as the world's second-biggest economy weathers slumping global confidence.

A preliminary reading of 49.8 for a manufacturing index released by HSBC Holdings Plc and Markit Economics today compares with a final reading of 49.3 for July. The final August number is due Sept. 1. A reading below 50 indicates a contraction.

The data suggests that growth in China is moderating rather than collapsing and the slide in the index in July may have been a one-off "blip," HSBC said. Investors are focused on the outlook for the nation as U.S. growth falters and European officials grapple with a debt crisis that is yet to be resolved.

"This should help lower fears of a hard landing akin to 2008 autumn's sharp slowdown," saidQu Hongbin, a Hong Kong- based economist for HSBC. "Inflation, not growth, remains the top near-term macro risk."

The Shanghai Composite Index rose 0.6 percent as of the 11:30 a.m. local time break in trading.

Faltering U.S. and European growth and a deepening debt crisis in the euro zone have triggered a four-week rout that's wiped out more than $8 trillion in global equity values. China's commerce ministry cautioned today that exporters face weak demand and rising costs.

'Soft Landing'
"China is on track for a soft landing despite the external risks, with accelerating inland growth and investment in public housing and new projects," Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong, said before the announcement.

HSBC's preliminary index, known as the Flash PMI, is based on 85 percent to 90 percent of responses to a survey of executives in more than 400 companies.

The preliminary number has matched the final reading twice since HSBC began publishing the series in February. The final reading fell below 50 in July for the first time in a year. The official manufacturing index released by the statistics bureau and the China Federation of Logistics and Purchasing had a reading of 50.7 in July.

China's central bank has raised interest rates five times since mid-October, imposed loan quotas and raised banks' reserve requirements nine times since November to cool inflation and growth.

Chinese officials need to observe and prepare for risks from the "turbulence in the global financial markets and as uncertainties in the global economic recovery increase," according a statement issued after a cabinet meeting chaired by Premier Wen Jiabao on Aug. 9.

Tougher credit conditions have led to slowing orders from Chinese steel mills, said Neville Power, chief executive officer of Fortescue Metals Group Ltd. (FMG), Australia's third-biggest producer of iron ore, on Aug. 19. Still, the company's head of China sales, David Liu, said underlying demand for steel in China remains "very, very strong."

Morgan Stanley and Deutsche Bank AG last week cut estimates for China's expansion as the debt burdens and elevated unemployment of developed nations threaten demand for exports.
 

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