China manufacturing gauge picks up in September

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China’s manufacturing sector saw a surprise pick-up in September, a closely watched survey showed Tuesday (September 23), providing some respite after a string of weak data pointing to a slowdown in world’s second-latest economy.

China’s manufacturing sector saw a surprise pick-up in September, a closely watched survey showed Tuesday (Sep 23), but economists warned a slowdown in the key property sector was an ongoing risk to growth.

HSBC’s preliminary purchasing managers index (PMI) hit a two-month high of 50.5, better than a final reading of 50.2 in August and providing some respite as indicators point to a slowdown in world’s second-largest economy. A reading above 50 indicates expansion.

Concerns over China’s economy – a key driver of global growth – have intensified following a string of lacklustre recent data, with economists calling for authorities to take further action to kickstart growth.

Qu Hongbin, HSBC’s chief economist for China, said that while the result indicated manufacturing sector activity was stabilising this month, expansion was still modest. “The property downturn remains the biggest downside risk to growth,” he said in the statement. “We continue to expect more monetary easing from the PBoC (People’s Bank of China) in order to steady the recovery,” he added.

Since April, Chinese authorities have introduced various stimulus measures, including small business tax breaks, targeted infrastructure spending and incentives to spur lending in rural areas and to small companies.

And last week reports said the PBoC would pump $81 billion into the country’s top five banks to spur lending.

 

FEARS OVER PROPERTY SLOWDOWN

Economists, however, have warned that the effect of stimulus measures introduced since April is waning and worry that a slowdown in the crucial property sector, where new home prices have fallen for four straight months, could derail any rebound.

On Tuesday, the Shanghai Securities News reported that China’s big four lenders will relax mortgage loan requirements, citing one of the banks. It added that people who had paid off previous mortgage loans would be treated as first-time buyers and enjoy preferential policies.

“If this is true, it constitutes a clear credit easing measure for the property sector,” economist Hua Changchun and colleagues at Nomura wrote in a reaction to the news report.

Earlier this month, the government said industrial production growth slowed sharply in August to its lowest level for more than five years, while expansion in retail sales and fixed asset investment also weakened.

Julian Evans-Pritchard, China economist at Capital Economics, said that while the PMI result indicated manufacturing had been boosted by demand for exports, the economy still had hurdles to surmount, property in particular. “Policymakers have remained relatively calm in the face of this quarter’s slowdown,” he wrote in a comment on the PMI. “Despite all the fuss over the recent liquidity injections by the People’s Bank, there has been no significant monetary easing.”

Finance Minister Lou Jiwei said at a weekend meeting that authorities would not make any significant policy adjustments even though downward pressure on economic growth remains, according to a government statement.

Earlier this month Premier Li Keqiang, at a World Economic Forum meeting in China, called for taking a long-term and comprehensive approach to managing the economy, suggesting the government was not overly concerned.

China’s economy grew a higher-than-expected 7.5 per cent in the second quarter, up from 7.4 per cent in the previous three months, which was the worst since a similar 7.4 per cent expansion in July-September 2012. Beijing is targeting expansion of about 7.5 per cent this year, the same as last year’s objective, as it tries to pull off a delicate transformation of the country’s growth model whereby consumer spending becomes the main driver rather than investment.

“We expect policymakers to stick with their current approach of using targeted support measures to prevent too rapid a deceleration in growth while at the same time avoiding the type of broader stimulus that could aggravate credit risks,” Evans-Pritchard wrote.

The PMI index is compiled by information services provider Markit and released by HSBC, which said the final result for September would be announced next Tuesday.

China releases its own official PMI at the beginning of each month. That indicator came in at 51.1 in August, down from 51.7 in July.

 

 

 

 

 

Sourcing : Channel News Asia | September 23, 2014

Thomas D’Innocenzi

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About thomasdinnocenzi

Thomas D’Innocenzi is a highly accomplished, results-focused international consultant with extensive experience in global sourcing and business development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global marketing and sourcing operations. He has extensive experience in international business development to accommodate rapid growth. Skilled in building top-performing teams, bench-marking performance, and developing organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. Tom founded Nova Advisors with the mission of providing expert Global Business Development consulting services for companies seeking to expand their market share as an independent consultant. Tom has a network of experts and advisors throughout the Asia-Pacific region and North America. His expertise includes business development, global sourcing, manufacturing, commodities, logistics, QA/QC, FDA, regulatory compliance, sustainability, and supply chain optimization. Tom is experienced in the medical device, apparel, consumer goods and technology services verticals helping companies advance their global sourcing capabilities and develop new markets through a local and sustained approach. Located in SE Asia and the United States, Tom expands market reach to drive sales. His global sourcing strategy includes directly negotiating with commodity suppliers, supply chain networks and distributors for optimal terms based on his expertise and first-hand knowledge of the players. Contact Tom to use his consulting service to increase your global market and make global sourcing profitable for you in the Asia Pacific Region and the United States. http://www.NovaAdvisors.com thomas@NovaAdvisors.com USA Direct: +1.904.479.3600 SINGAPORE: +65.6818.6396 THAILAND: +662.207.9269
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