Chinese Manufacturing Showing Growth Signs

According to recently published global media reports, China’s manufacturing sector is showing signs of expansion in September. An official survey indicated that recent positive momentum can have sustained manufacturing growth in China.

NEW DELHI: The official Purchasing Managers’ Index (PMI) stood at 50.4 in September, identical with the previous month’s level. A reading above 50 shows growth on a monthly basis.

After a significant pick-up in March, China’s official PMI slipped, falling below 50 in July before showing expansion in August.

In an encouraging sign, new export orders increased in September, rising to 50.1 from the previous month’s 49.7.

In September, output edged up to 52.8 from 52.6 in August, but the index for total new orders slipped to 50.9 from 51.3.

Economists say the pattern over the past few months suggested sustained economic growth, but a growing dependence on government spending and an overheated property market may pose increased risks later this year with debt levels continuing to rise.

Industrial profits rose at the fastest pace in three years in August, with rising sales and higher prices stimulated by a construction boom and heated property market.

But profits remained uneven, as traditional heavy industries with excess capacity such as steel still struggled for growth.

Sectors like high-tech, car manufacturing and shipbuilding showed strong expansion, the survey showed.

Industrial overcapacity remains one of the main drags on economic growth.

Beijing has pledged to quicken the pace of its industrial capacity cuts, particularly in steel, after falling behind earlier in the year.

China’s state planner rejected a request in September by the nation’s steel makers for coal mines to ramp up coking coal output to help ease supply tightness that has triggered a frenzied price rally.

China’s slowing economy and problems with industrial overcapacity have also reduced investment opportunities, a view reinforced by Fan Gang, a member of China’s central bank monetary committee. Private investment grew just 2.1 per cent in the first eight months of the year, remaining at record lows.

A similar official survey showed activity in China’s services sector expanded at a slightly faster pace, with the official reading at 53.7 in September from 53.5 in August.

A measure of the construction industry rose as the government has gone on an infrastructure spending spree.

The services employment sub-index rose in September, but still indicated services companies were cutting staff.