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Finance & Economy

China PMI steadies, but doesn’t dispel growth worries


A shipyard is silhouetted against the rising sun in Dalian, Liaoning province

A shipyard is silhouetted against the rising sun in Dalian, Liaoning province

Activity in China’s factories increased marginally in April but export orders fell sharply, a government survey showed on Thursday, adding to questions about whether the world’s second-largest economy is stabilizing after its first-quarter slowdown.

The data came a day after Premier Li Keqiang pledged to step up support for the trade sector, adding to measures taken over the past month on concerns that the economy may be losing momentum more quickly than expected.

The Purchasing Managers’ Index rose to 50.4 in April from March’s 50.3, the National Bureau of Statistics said, one of the first indicators of how the economy started the second quarter.

At just above the 50 level that separates growth from contraction, it indicated a slight pick-up in activity for the month, although it was a notch below economists’ expectations.

Zhang Liqun, an economist at the Development Research Centre, which helps compile the PMI, said the index pointed to stabilizing economic growth ahead, but others disagreed.

“We do not believe the economy has passed a turning point,” said Zhiwei Zhang, China economist at Nomura.

Zhang expected annual economic growth to slow to 7.1 percent in the second quarter from an 18-month low of 7.4 percent in the first, adding the risks were to the downside.

The new orders sub-index in the PMI rose to 51.2 in April from 50.6 in March, but the sub-index for export orders fell to 49.1 last month from 50.1 in March.

Data last month showed exports fell in annual terms for a second straight month in March, the weakest run since 2009.

The official PMI is weighted more towards bigger and state-owned enterprises and tends to paint a rosier picture than a PMI compiled by HSBC and Markit Economics, which focuses more on smaller private firms.

A preliminary reading of the HSBC/Markit PMI last week showed factory activity shrank for a fourth straight month in April, although at a slower pace than in March. The final reading is due on Monday.

COOLING PROPERTY

Sun Wencun, an economist at CITIC Securities in Beijing, said exports could benefit from a recovery in developed economies but the property sector was a big concern.

“The economy is showing slight improvements due to recent policy measures but there is no sign of a bottoming out, and the trend of slowdown is continuing as the sluggish property market weighs on related industries,” he said.

Analysts see the property sector as a key risk to growth as evidence mounts of a rapid cooling in what had been one of the few strong spots in the economy.

The rate of growth in home prices slowed in April, two private surveys showed on Thursday. The property sector supports some 40 other industries, ranging from cement to furniture, and plays an important role in underpinning consumer confidence.

The property market has lost steam since late 2013 after authorities tightened controls on speculative buying and banks made it harder for home buyers and small developers to get loans.

Official media reported this week that the southern city of Nanning, has eased rules on house buying in an effort to boost the local economy, raising speculation it could be the start of a series of local-level support measures.

JOBS GROWTH

The government is trying to restructure the economy so it is driven more by consumption than the traditional engines of exports and investment, but wants to avoid a sharp slowdown that could fuel job losses and threaten social stability.

The employment sub-index of the PMI held steady at 48.3 in April, indicating contraction. The government has taken steps to create more jobs, particularly for college graduates.

Premier Li has said that the economy must grow 7.2 percent annually to create 10 million jobs a year.

A Reuters poll found economic growth is forecast to slow to 7.3 percent in the second quarter. For 2014, growth of 7.3 percent is expected – the weakest showing in 24 years and down from 7.7 percent last year.

Respondents also expected the central bank to cut the amount of deposits that banks must hold as reserves by 50 basis points in the third quarter.

Source: Reuters “China PMI steadies, but doesn’t dispel growth worries
 
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About chankaiyee2

Author of the book "Tiananmen's Tremendous Achievements" about how with the help of Tiananmen Protests, talented scholars with moral integrity seized power in the Party and state and brought prosperity to China. The second edition of the book will be published within a few days to mark the 25th anniversary of Tiananmen Protests All the parts in the first edition remain in the second edition with a few changes due to information available later and better understanding. There are also some changes for improvements of style. The new parts are Chapters 12-19 on events in China after the first edition was published: The fierce power struggle for succession between reformists and conservatives; Xi Jinping winning all elders’ support during his mysterious disappearance for 2 weeks in early September, 2012; and Xi Jinping Cyclone. Chan Kai Yee's new book: SPACE ERA STRATEGY: The Way China Beats The US An eye-opening book that tells the truth how the US is losing to China. The US is losing as it adopts the outdated strategy of Air-Sea Battle while China adopts the space era strategy to pursue integrated space and air capabilities: It is losing due to its diplomacy that has given rise to Russian-Chinese alliance. US outdated strategy has enabled China to catch up and surpass the US in key weapons: Hypersonic weapons (HGV) that Pentagon regards as the weapon that will dominate the world in the future. Aerospaceplane in China’s development of space-air bomber that can engage enemy anywhere in the world within an hour and destroy an entire aircraft carrier battle group within minutes. Anti-satellite (ASAT) weapons, anti-ASAT weapons, stealth aircrafts, drones, AEW&C, etc. The book gives detailed descriptions of China’s weapon development based on information mainly from Chinese sources that the author monitors closely. U.S. Must Not Be Beaten by China! China is not a democracy. Its political system cannot prevent the emergence of a despotic leader or stop such a leader when he begins to bring disasters to people. A few decades ago, Mao Zedong, the worst tyrant in world history did emerge and bring disasters to Chinese people. He wanted to fight a nuclear war to replace capitalism with communism but could not bring nuclear holocaust to world people as China was too weak and poor at that time. If a despot like Mao Zedong emerges when China has surpassed the US in military strength, world people will suffer the misery experienced by Chinese people in Mao era. China surpassing the US in GDP is not something to worry about as China has the heavy burden to satisfy its huge population, but China surpassing the US in military strength will be world people’s greatest concern if China remains an autocracy. US people are of much better quality than Chinese people. What they lack is a wise leader to adopt the correct strategy and diplomacy and the creative ways to use its resources in developing its military capabilities. I hope that with the emergence of a great leader, the US can put an end to its decline and remain number one in the world. China, US, space era strategy, air-sea battle, space-air bomber, arms race, weapon development, chan kai yee

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