China manufacturing up in May

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China’s manufacturing activity strengthened to a five-month high in May, the government said Sunday, an optimistic sign amid slumping growth in the world’s second-largest economy.

The official purchasing managers index (PMI) reached 50.8 in May, the National Bureau of Statistics said in a statement, up from 50.4 in March.

The index tracks manufacturing activity in China’s factories and workshops and is a closely watched indicator of the health of the economy. A reading above 50 indicates growth.

The result, the third straight month of improvement, beat the median forecast of 50.6 in a survey of eight economists by Dow Jones Newswires.

A private survey published last month by British bank HSBC put China’s PMI at a preliminary 49.7 in May — also a five-month high — and above April’s 48.1.

China’s official May result was the highest since a reading of 51.0 in December.

“The improvement of both PMIs suggest that the economic activities have stabilised somewhat due to the recent pro-growth policies”, ANZ Bank economists Liu Li-Gang and Zhou Hao said in a research note.

They cited an acceleration in budgeted fiscal spending and tax rebates to help exporters announced earlier this year.

The May PMI data came after China’s economic growth for the first three months of 2014 came in at its weakest pace in 18 months.

Gross domestic product grew 7.4 per cent in the first quarter from the same period the year before, weaker than the 7.7 per cent in the October-December period.

The result was the worst since a similar 7.4 per cent expansion in the third quarter of 2012.

China’s leadership says it wants to make private demand the key driver for the country’s economic growth, moving away from over-reliance on huge and often wasteful investment projects that have girded decades of expansion.

Such a transformation is expected to result in growth that is slower but seen as more sustainable in the long run.

China in March set its annual growth target for this year at about 7.5 per cent, the same as last year.

Officials, including Premier Li Keqiang, have been quick, however, to stress that the target is flexible — seen as a hint it may not be achieved.

Still, China on Friday signalled it will further ease monetary policy to support the economy by cutting the amount of funds that some banks must hold in reserve, a sign officials are concerned.

The State Council, China’s cabinet, announced that it would trim reserve requirements for banks which lend to the agricultural sector and small enterprises.

China launched a similar, targeted reserve cut for banks in rural areas just over a month ago amid escalating worries the economy is slowing more sharply than expected.

“In our view, these targeted ‘mini stimulus’ measures are not sufficient enough to prevent the sentiment from deteriorating again,” the ANZ economists said.

“We maintain our call that it is necessary to cut reserve requirement ratio for the whole banking sector”, they added, saying that would “send out a strong policy signal” that authorities will support growth even as they pursue economic reforms.

Cutting reserve requirements is seen as a way to boost economic growth by freeing up cash that banks can potentially lend out.

 

 

 

 

 

Source : Channel News Asia | June 1, 2014

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About thomasdinnocenzi

Thomas D'Innocenzi is a highly accomplished, results-focused senior international executive with extensive experience in global sourcing and market development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global sourcing operations worldwide. Extensive experience in international market development operations to accommodate rapid growth. Skilled in building top-performing teams, benchmarking performance, and restricting organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. As principal of Nova Advisors, LLC I’ve assembled an exemplary team that brings with them the knowledge and experience gained from starting up a Global Sourcing program with multiple Fortune 500 companies as well as the largest supplier network throughout the Asia-Pacific region. We have experience and expertise in more than a thousand medical and pharmaceutical products in manufacturing and sourcing at the best value. The right product, the right price point and the right branding fueled these successes that resulted in double-digit growth for top line sales and bottom line net margins for our customers. What sets us apart: • Our reach includes a large network of suppliers & manufacturers spanning 13 countries in Asia-Pacific region • We understand the manufacturing process and the business of the supplier and the buyer • Our company culture is based on quality assurance and our process is based on local quality control Our commitment is to be your partner offering the best products and services at the lowest cost. Contact me to discuss how we can make the global marketplace work for you. thomas@novaadvisors.com In addition, I am open to discussing opportunities in global sourcing, international marketing & sales, logistics and medical/pharma in Thailand, Vietnam, Malaysia, Philippines & Japan. Aside from my work I enjoy piano, astronomy, physics, and assisting my daughters with their studies. SPECIALTIES: Global Sourcing, Supply Chain Management, Business Development, Marketing, Logistics, Global Networking, Market Development, Healthcare Solutions, Pharmaceuticals, Medical Devices, Technology, Asia, Southeast Asia, US and Canada
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