Survey shows increase in Oct manufacturing

By Wang Xinyuan Source:Global Times Published: 2013-10-24 23:08:01

A woman arranges textile products that will be exported to South Korea in a factory in Huaibei, East China's Anhui Province on Thursday. Photo: IC

A woman arranges textile products that will be exported to South Korea in a factory in Huaibei, East China's Anhui Province on Thursday. Photo: IC

GT

 



 

China's manufacturing activity in October has risen to a seven-month high according to a preliminary survey released Thursday, partly thanks to strong new orders.

The flash HSBC Purchasing Managers' Index (PMI) for October reached 50.9, up from a final reading for September of 50.2. It's the highest level since March, according to the HSBC data.

A reading above 50 indicates expansion from the previous month while one below 50 shows contraction.

The sub-index for new orders rose to 51.6, up from 50.7 in September and also a seven-month high, the data showed.

"This implies that China's growth recovery is becoming consolidated into the fourth quarter 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," HSBC said.

Apart from PMI readings, other recent economic indicators have also been promising. For instance, industrial output increased by 9.6 percent year-on-year in the first three quarters of this year, with substantial growth in the third quarter, Xiao Chunquan, spokesman for the Ministry of Industry and Information Technology, said at a press conference Thursday.

But despite positive signs for accelerated growth, "external demand is still weak, and overcapacity issues remain obvious, so the rebound in manufacturing activities is not solid yet," Xiao said.

China's official PMI for October is scheduled to be released on November 1, said Liu Ligang, chief China economist at ANZ Banking Group.

The official PMI, which covers large manufacturers, has risen for three months in a row, hitting a 17-month high of 51.1 in September.

"The 7.5 percent government growth target is expected to be reached this year," Liu told the Global Times Thursday.

The world's second-largest economy grew by 7.8 percent in the third quarter from a year earlier, compared with 7.7 percent in the first quarter and 7.5 percent in the second, official data showed.

But the economic growth target is expected to be lowered to 7 percent in 2014 considering the new reform measures aimed at sustainable growth, which is not a bad thing, Liu noted.

"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," said Zhang Zhiwei, chief China economist at Nomura Securities, in a research note sent to the Global Times on Thursday.

The central bank's tightening monetary policy has been less effective as hot money has been flowing into China, given the expectation of a stronger yuan and higher interest rates. The hot money inflow has also been pushing up asset prices, particularly in the property sector, Liu said.

Further opening up of the capital account by lifting the cap on overseas investment by Chinese people will help bolster capital outflows, and this will ease the pressure of bubbles in domestic assets caused by money inflows, Liu told the Global Times.

Chinese citizens are currently allowed to purchase foreign exchange up to a limit of $50,000 per year, but if the cap can be lifted to $500,000 or even $1 million it will encourage overseas investment, he said.

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