《【妖舞魔亂】Chinese Manufacturing Growth Slows, Survey Shows (Update3)》+01

 

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【Chinese Manufacturing Growth Slows, Survey Shows (Update3)】+01
【Bloomberg News】

 

May 4 (Bloomberg) -- Chinese manufacturing grew at a slower pace in April according to a survey of more than 400 companies, indicating that government efforts to prevent overheating in the economy may be starting to bite.

A purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics fell to a six-month low of 55.4. That contrasted with a government survey showing manufacturing accelerated. HSBC says its study has a different methodology and gives a bigger weighting to smaller, privately owned businesses.     China’s policy makers two days ago ordered banks to hold more of their assets as reserves for the third time this year, and have also sought to rein in the nation’s property market. Any sustained slowdown in the nation’s factories would alleviate inflation pressures, and could affect the government’s decision whether to end the yuan’s peg to the dollar.

 

Today’s data is good news that “points to a moderate slowdown in the expansion of manufacturing activity,” Qu Hongbin, chief China economist at HSBC in Hong Kong, said. “Beijing’s policy tightening is starting to cool the overheated economy, which will help to contain inflationary risk in the coming quarters.”      Stocks in Asia erased gains after the release and oil futures hit their lows of the day. The MSCI Asia Pacific Index of shares dropped 0.3 percent to 124.31 as of 11:07 a.m. Hong Kong time. Crude oil for June delivery declined 0.4 percent to $85.84 a barrel.

Conflicting Results

Different methods of seasonal adjustment may be the main explanation for the conflicting results, according to Qu. The government index, released May 1, showed an increase to 55.7 from 55.1. A number above 50 indicates an expansion.

HSBC’s survey showed output and export orders growing at a slower pace. An index of input prices surged to 69.9 in April from 65.9 in March, signaling that “the inflation risk is on the rise,” Qu said.

The central bank is likely to keep ratcheting up reserve requirements and “interest-rate hikes are also needed to anchor inflation expectations,” the economist said.

The economy expanded 11.9 percent in the first quarter, the fastest pace in almost three years, and property prices rose by a record in March after an unprecedented boom in lending that countered the effect on China of the global financial crisis.

Export Recovery

Exports are recovering, climbing 29 percent in the first quarter from a year earlier, and profits are rising. Industrial companies reported a doubling of net income in the first quarter from a year earlier, statistics bureau figures for 24 provinces showed.

BYD Co., the Chinese carmaker backed by Warren Buffett, said first-quarter profit more than tripled on higher demand in the world’s biggest auto market. Baoshan Iron & Steel Co. estimates that its first-half profit may increase as much as 10-fold.

Vice Finance Minister Li Yong said yesterday that inflation is causing concern and economic growth may have been “a little bit” too fast. He spoke at an Asian Development Bank event in Tashkent, Uzbekistan.

Investor Marc Faber is more pessimistic. The Chinese economy has “symptoms of a major bubble” and may crash in the next nine to 12 months, Faber said in an interview on Bloomberg Television.

While officials are paring back stimulus by targeting a 22 percent reduction in new loans this year and raising reserve requirements, the central bank is yet to raise interest rates from crisis levels. It has also left the yuan pegged at about 6.83 per dollar since July 2008 to aid exporters.

Inflows of speculative capital from investors betting on yuan gains may have driven the latest increase in reserve requirements, according to Lu Zhengwei, a Shanghai- based economist at Industrial Bank Co.

--Sophie Leung, Paul Panckhurst. Editors: Paul Panckhurst, Michael Heath.

To contact Bloomberg News staff for this story: Sophie Leung in Hong Kong at +852-2977-6126 or sleung59@bloomberg.net
Last Updated: May 3, 2010 23:52 EDT

 

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