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Manufacturing in China’s private sector expands 1st time in 4 months

MANUFACTURING activity in China's private and export-oriented companies expanded for the first time in four months in February, indicating a weak yet stabilizing economy after easing policies, a survey showed today.

The HSBC Purchasing Managers' Index, an indicator of operating conditions in the industrial sector weighing towards private and export-oriented firms, landed at 50.7 last month, according to HSBC and research firm Markit.

A reading of 50 separates expansion from contraction, and February's posting was up from January's 49.7 and the earlier flash reading of 50.1 to signal the first expansion in the sector since last October.

In comparison, the official PMI, compiled by the National Bureau of Statistics and the China Federation of Logistics and Purchasing, increased to 49.9 in February from 49.8 a month earlier, still pointing at contracted activities in state-owned industrial companies.

Qu Hongbin, chief economist for China at HSBC, said China's manufacturing sector saw an improvement in overall operating conditions.

"Companies registered the strongest expansion of output since last summer while total new business also rose at a faster rate," Qu said. "However, the renewed fall in new export orders suggested that foreign demand has weakened, while manufacturers continued to cut their staff numbers."

Marked reductions in both input and output prices also indicated that deflationary pressures persist, Qu said.

To bolster the economy and counter the rising deflation risks, China's central bank announced to trim the one-year deposit and lending rates by 0.25 percent on Saturday. It was the second interest rate cut in three months and followed a reduction of reserve requirement ratio, or the amount of funds commercial banks must set aside as reserves, in early February.

China's gross domestic product expanded 7.4 percent from a year earlier in 2014, the slowest pace in 24 years.




 

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