China's Manufacturing Index Continuously Rebounded In July And August

China's Manufacturing Index Continuously Rebounded In July And August

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China's manufacturing industry index rebounded. The HSBC China Manufacturing Purchasing Managers Index (PMI) Preview was announced yesterday. It showed the value data of early August is 49.8, rebounded for two consecutive months, indicating China's manufacturing activity cooled slightly.

According to the current analysis the market data presents a positive trend, this gives the Central Bank of China enough space to keep the continuity of monetary policy. The time when the central bank raises interest rates may be delayed.

The macro-economic indicators for August announced by HSBC yesterday showed that the leading indicator value of China's manufacturing industry was 49.8, rebounded slightly from 49.3 last month. But this leading indicator value was still below 50 which is the dividing line for the trend of manufacturing industry. The decrease of other sub-indexes also reduced, the New Export Orders Index rebounded to 49.6 reaching the summit of the latest three months.

"The growth rate of initial manufacturing PMI in August was consistent with the growth rate of industrial value added which was 13%." The chief editor of iFreeTouch.com said, "The growth rate of above-scale industrial value added was 14% in July. Although this growth rate continued to decline this month, but it was still within the expectations of the market. It eased the fears of a economic hard landing."

In the values of other HSBC PMI sub-indicators, the contraction of output index and employment index was slowing, consistent with the overall trend. The prices of production input and output was still accelerating, the manufacturing industry would continue to face pressures of cost-push. The reduction of manufacturing finished goods inventory was accelerating.

For the slowdown of China's manufacturing industry, investment banks have begun to reduce the forecast of China's annual GDP growth rate. Investment banks also expect the Central Bank of China to delay the time of rising interest rates.

Deutsche Bank released a report recently, it showed that the forecast of China GDP growth in 2011 was reduced from 9.1% to 8.9%. In the next 1 or 2 years the debt problem in Europe will keep conducting to the global financial system, the world economy will face the greatest risk. This report also forecasted that
China GDP growth would reduce from 8.6% to 8.3% in 2012 and export growth would reduce from the original 15% to 11%. Taking into account the impact of falling commodity prices, China's CPI growth forecast value in 2012 was lowered from 3.5% to 2.8%. If Europe and U.S. economy falls to the bottom again, China will have to take a certain stimulus policy. The new round of stimulus should not invest mainly in infrastructure, it should stimulate consumption and support SMEs, affordable housing, services and agriculture which are structural weaknesses of China's economy.

Experts believe that the Central Bank of China will keep up stable monetary policy and stress the importance of maintaining economic growth and managing inflation. The statistics data of manufacturing industry have provided the central bank with more control space. Analysis was expected that M2 growth would fall below 14% in August. Year on year M2 growth rate dropped to 14.7% and annulus M2 growth rate reduced 792.1 billion Chinese yuan in July, the new bottom since June 2005.

Currently the market liquidity is still very scarce. The interest rate of central voting raised unexpectedly last week, which showed that the current policy would maintain a constrictive orientation. The funds leverage of current banking system is still under control, the impact of raising interest rates is far from the impact of funds austerity in fact. According to the estimates of CICC (China International Capital Corporation Limited), the overall bank excess savings rate is around 1% now and the repo rate is easy to fluctuate greatly due to short-term financing needs.

Foreign exchange had been reduced to the lowest level of 219.6 billion Chinese yuan in July, and the incremental credit was also lower than the expectations of markets, so the decline of M2 growth is not surprising in the second half of 2011. The central bank is expected to tolerate a lower monetary growth this year.

About the Author:
Ben Taylor is an editor of Global Product Market. He is interested in global online business. You can send mail to him if you've got any questions about global business.



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


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