Initial findings from the China HSBC Flash Manufacturing Purchasing Managers Index (PMI) indicate solid credit growth, firmer exports and rising industrial output during the last month with a score of 50.4, the highest achieved in 13 months.
A sub-index measuring output also mirrored the PMI’s 13 month high, reaching 51.3.
Early signs in September suggested the industry was beginning to show growth and carried through into October, with the latest figures reinforcing the beliefs many analysts and investors that the world’s second largest economy would end the year on a more positive note.
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HSBC Chief China Economist, Hongbin Qu commented:
“This confirms that the economic recovery continues to gain momentum towards the end of the year. However, it is still the early stage of recovery and global economic growth remains fragile. This calls for a continuation of policy easing to strengthen the recovery.”
In an attempt to stimulate growth, the Chinese central bank has cut interest twice in the last six months and accelerated the economy via moves such as opening previously-closed sectors to private investments and supporting infrastructure development without adding to the existing debt.
The one factor which didn’t experience growth was the sub-index measuring output prices, which actually fell. This has been attributed to the continued struggle by manufacturers with overcapacity and stagnating domestic demand, combined with increasing competition from new international suppliers.
Head of Chinese textile exporter Hodo Group, Zhou Haijiang stated:
“Not only Western countries manufacture industrial goods, but also a lot of developing countries including former socialist countries which now have market economies, therefore creating a global surplus that cannot be changed.
“Because of this it is hard to raise sales prices, everyone is selling and it is hard for manufactured goods prices to rise. In some cases prices have even fallen.”
Though the fourth quarter is predicted to be highest of the year, full-year expansion for 2012 is still expected to be the slowest in over a decade.