Dec 02, 2013

    No let-up in China output momentum


    A CHINESE manufacturing gauge exceeded analysts' estimates last month, indicating the nation's economic recovery is sustaining momentum amid government efforts to rein in credit growth.

    The Purchasing Managers' Index was 51.4, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing yesterday.

    That's the same reading as in October and was higher than 24 out of 26 estimates in a Bloomberg News survey that had a median forecast of 51.1.

    Stability in manufacturing growth in the world's second-biggest economy may give Premier Li Keqiang more room to implement policy changes laid out at a Communist Party meeting last month.

    While industrial investment is picking up and retail sales have increased 13 per cent so far this year, China faces headwinds that include industrial overcapacity, excessive corporate debt and slower export demand.

    "This is good news for policymakers as the expected slowdown in growth appears pretty mild," said Dr Shen Jianguang, chief Asia economist at Mizuho Securities Asia in Hong Kong. "As policymakers can be assured of growth of over 7.5 per cent, the attention is now firmly on reform."

    China's benchmark Shanghai Composite Index of stocks rose 3.7 per cent last month, the biggest monthly gain since August, on optimism that the reform package outlined by Communist Party leaders on Nov 15 will bolster the economy and corporate earnings.

    Gauges in the CSI 300 tracking industrial, technology and material producers rallied more than 4 per cent while utilities declined.

    Even so, economists estimate growth in gross domestic product will slow to 7.5 per cent next year from 7.6 per cent this year, according to the median projection in Bloomberg News surveys last month. The government set a target of 7.5 per cent expansion this year and Mr Li said in October that China needs annual growth of 7.2 per cent to keep unemployment stable.

    Estimates for the federation's Purchasing Managers' Index in Bloomberg's survey ranged from 50.8 to 51.5. The reading contrasts with a decline in the preliminary figure of a separate gauge from HSBC Holdings and Markit Economics released on Nov 21 to 50.4 from October's 50.9. The median forecast for the final number due tomorrow is 50.5.

    The PMI survey from the statistics bureau and logistics federation is based on responses from purchasing managers in 3,000 manufacturing companies.

    The HSBC survey is based on responses from managers at more than 420 businesses, and is weighted towards smaller private companies.

    Levels above 50 signal expansion in manufacturing while readings below point to a contraction.

    A gauge of output in yesterday's survey rose to 54.5 from 54.4 in October, while a new-orders index declined to 52.3 from 52.5.

    A measure of new export orders increased to 50.6 from 50.4 and an employment index rose for a second month to 49.6, the highest level since March.

    A more forceful government crackdown on industrial overcapacity, rising prices of utilities under government reform plans, and central-bank measures to rein in credit and shadow banking may limit a stronger rebound in manufacturing in coming months.