China Manufacturing Slowdown Eases

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The China Federation of Logistics & Purchasing reported that the Purchasing Managers Index increased to 49.0 last month from 45.3 in January.

The CLSA China PMI also climbed to 45.1 in February from 42.2 in January. Analysts warn that the improvement might just be short-term because domestic and external demand is still depressed.

The governments measures to support the economy are having an impact and Chinas economy is undergoing an active change, including an increase in the restocking of inventories, rapid credit growth, and a recovery in electricity generation, CFLP PMI analyst Zhang Liqun told The Wall Street Journal.

A PMI figure of above 50 is indicative of an expansion in manufacturing. Chinas CFLP PMI has been below 50 for five months and the CLSA PMI has been below 50 for seven months.

The CLSA data is gathered from a survey of 400 companies and is considered a reliable indicator agains the governments official PMI figures.

Chinas economy could be entering a sustained recovery track, Zhang Liqun added.

The spike in the manufacturing sector may indicate that companies were restocking supplies after downsizing inventory previously rather than a symptom of improving demand.
Only time will tell if the manufacturing sector has already passed the most painful part of the economic slowdown and will now begin bottoming out. Chinas industrial sector isnt decelerating as rapidly as it did last autumn it remains to be seen if this uptrend is sustainable, J.P. Morgans chairwoman of China Equities, Jing Ulrich, was quoted by MarketWatch.

In the CFLP PMI, finished-goods inventory increased to 47.7 in February from 43.5 in January and 45.3 from 44.7 over the same period in the CLSA PMI.

Last December, the steel production industry began gathering stocks and raising prices in anticipation of the demand to be created by the governments stimulus plans. Currently the surge has still not happened and manufacturers has since cut prices.

According to a 2008-2009 China Manufacturing Competitiveness Study done by AmCham Shanghai, 90 percent of respondents say that they plan to retain manufacturing operations in the country despite challenges. The companies cite that Chinas domestic market potential is the top reason for staying and not moving to another lower cost country.

About the Author:
This article was written by the law and tax experts at Dezan Shira & Associates, who specialise in providing professional services for foreign companies looking to do business in China. Similar stories can be read at the China business news site China-Briefing.com, which publishes expert articles about doing business in China.




Article Originally Published On: http://www.articlesnatch.com


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