A Chinese manufacturing gauge rose by more than economists expected, suggesting that a slowdown in the world’s second-biggest economy may be stabilising.
The purchasing managers’ index was 50.3 in December from 49 in November, according to a statement on Sunday from the statistics bureau and China’s logistics federation. The reading exceeded all forecasts in a Bloomberg News survey of 15 economists where the median estimate was 49.1.
President Hu Jintao said yesterday in his New Year address that China aims for steady and “relatively fast” growth in 2012 amid an increasingly unstable global recovery. Europe’s sovereign debt crisis and a crackdown on speculation in China's housing market may limit the expansion and officials are also grappling with banks’ bad loan risks after a record jump in credit in 2009 and 2010.
“Growth momentum will continue to wane this quarter, as the European crisis will hurt China’s exports and a cooling property market will drag down domestic demand,” said Zhang Zhiwei, a Hong Kong-based economist at Nomura Holdings Inc who has previously worked for the International Monetary Fund. “The rebound does not signal that the economy has turned around.’”
The “festival effects” of the western New Year and upcoming Chinese celebrations helped boost the gauge, on Sunday’s statement said. While a separate index released by HSBC Holdings Plc and Markit Economics on December 30 indicated that manufacturing contracted for a second month, that gauge also rose. The studies have different sample sizes and methodologies.
Reserve requirements
The central bank may cut banks’ reserve requirements as demand for cash increases ahead of a weeklong Chinese New Year holiday starting Jan. 23 and the government tilts its focus toward sustaining growth. Standard Chartered Bank said December 30 that a reduction could come before financial markets reopen on January 4.
The Shanghai Composite Index tumbled 22 per cent last year, the most since 2008, on concern that monetary tightening and efforts to rein in property prices in big cities will derail growth. The index’s 33 per cent drop since 2009 makes it the worst performer among the world’s 15 biggest markets.
Over the year, shares of Jiangxi Copper Co, China’s biggest producer of the metal, slid 51 per cent.
Bank of America Merrill Lynch estimates that the Chinese economy grew 8.7 per cent in the three months through December from a year earlier, the slowest pace since the second quarter of 2009.
No ‘Big Slowdown’
In on Sunday’s statement, the logistics federation said the economy’s slowdown is stabilising even as growth momentum remains “relatively weak.” A gauge of export orders rose, while remaining below 50, the dividing line between contraction and expansion. An output index jumped to 53.4 from 50.9 in November.
December’s rebound shows that China “won’t see a big slowdown in 2012,” Zhang Liqun, a senior researcher at the Development Research Center of the State Council, said in the statement. In November, the gauge had pointed to the first contraction in manufacturing since February 2009.
Nomura estimates that China’s economy, the biggest contributor to global growth, will expand 7.9 percent in 2012, the least in 13 years. Inflation is moderating after reaching a three-year high of 6.5 percent in July.
“The urgency of containing inflation isn’t as high as that in the beginning of 2011,” Zhou Xiaochuan, the governor of the central bank, was cited as saying in an interview published by Caixin Century magazine on its website on Dec. 31.
The logistics federation’s manufacturing index is based on a survey of purchasing managers in more than 820 companies in 20 industries. The HSBC PMI covers about 430 businesses.
