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October 25, 2013

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Home » Business » Economy

Manufacturing at 7-month high

By Wang Yanlin | October 25, 2013, Friday | Print Edition

China’s manufacturing activity expanded at the fastest pace in seven months in October on the back of broad economic improvement, a preliminary survey showed yesterday.

The HSBC Flash China Manufacturing Purchasing Managers’ Index, the earliest available indicator of China’s industrial sector’s vitality, rose to 50.9 in October from September’s final index of 50.2. A reading above 50 means expansion.

Qu Hongbin, chief economist for China and co-head of Asian Economic Research at HSBC, said the latest index suggested that China’s growth recovery was stabilizing following the bottoming out in the third quarter.

“This momentum is likely to continue in the coming months, creating favorable conditions for speeding up structural reforms,” Qu said.

China’s gross domestic product growth accelerated to 7.8 percent in the third quarter, up from an increase of 7.5 percent in previous quarter.

Zhu Haibin, chief economist for China at JPMorgan, said the pickup in the flash HSBC PMI exceeded his expectation.

“It reduces the downside risk of China’s growth outlook in the near term,” Zhu said.

The component indices showed that domestic demand continued to improve. The output increased further to 51 in October from last month’s 50.2, new orders rose from 50.8 to 51.6, and new export orders also ticked up 0.1 points to 50.8.

“The strong recovery in the third quarter seems to have boosted confidence,” Zhu said. “It is almost for sure that China will achieve this year’s growth target at 7.5 percent.”

Zhang Zhiwei, an economist at Nomura, also said the higher flash HSBC PMI suggested the economic growth momentum may hold up in October. But he warned of another slowdown in the fourth quarter due to tightening of monetary policies.

“We maintain our view that growth will slow to 7.5 percent in the fourth quarter and 6.9 percent in 2014 as monetary policy tightens to contain inflation and financial risks,” Zhang said.

As inflationary pressure resurged with the Consumer Price Index rebounding to 3.1 percent in September, the central bank is unlikely to change the tightening bias in the monetary policy for the remainder of the year, analysts said earlier.

Also, some key activity indicators, such as exports which dropped for the first time in three months in September, showed signs of weakness and suggested China’s economy was not free of imminent concerns.

In the first three quarters, industrial production expanded 9.6 percent year on year, quickening from the pace of 9.3 percent in the first half, according to the National Bureau of Statistics.

At a recent forum organized by the AmCham Shanghai, participants suggested innovation and supply chain efficiency are key to enhance manufacturing competitiveness in China.

 

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