According to a survey released on Thursday, China's manufacturing industry may be slipping for the first time in a year, shrinking the number of new orders, and factories are struggling to cope with high inflation.
HSBC’s flash PMI is intended to provide an early snapshot of the state of industrial activity. The Chinese manufacturing PMI preview fell to 48.9 in July, the lowest level in 28 months. The final PMI for this month will be released on August 1. PMI below 50 indicates contraction of activity.
Weak PMI has aggravated people's concerns that the government's persistent efforts to tighten monetary policy are affecting economic growth. However, analysts cautioned people not to overreact, saying that the second-largest economy in the second half of the year will continue to show strong performance.
Qu Hongbin, chief economist at HSBC China, said that "the flexibility of consumer spending and the continued investment in a large number of infrastructure projects" will support China's economic growth for the rest of the year, keeping the growth rate at about 9%. In the first half of this year, China’s economy expanded by 9.6%, making it the fastest growing large economy in the world.
Chinese Premier Wen Jiabao said last week that the government must strike a balance between curbing price pressures and preventing severe fluctuations in economic growth.
Confronted with the highest inflation in three years, the People's Bank of China has steadily tightened its policy over the past nine months. So far, it has raised interest rates five times and raised bank deposit reserve ratio nine times.
Even after all these measures are taken, inflation is still a stubborn opponent. HSBC's PMI preview shows that input costs rebounded in July. However, if the manufacturing slowdown continues to deepen, it may prompt the Chinese government to suspend its tightening policy.
On Thursday, China's main stock index, the Shanghai Composite Index fell 1%, which is the fourth consecutive decline in the index, reflecting the market's worries about the outlook.
The state-owned China Development Bank (CDB) stated that it has cancelled the issuance of a bond issue scheduled for Friday. The bank did not explain the reasons, but the PBOC’s tightening actions have taken away cash from the Chinese currency market, resulting in a series of short-term debt auctions that have been under-subscribed in recent weeks.
From a more long-term perspective, the International Monetary Fund (IMF) stated in its annual report on China’s economy that China’s economy is still “steadyâ€, partly because employment and wage growth have boosted domestic consumption. However, the IMF warned that food price-driven inflation, housing bubbles, and declining credit quality all pose risks.
HSBC’s flash PMI is intended to provide an early snapshot of the state of industrial activity. The Chinese manufacturing PMI preview fell to 48.9 in July, the lowest level in 28 months. The final PMI for this month will be released on August 1. PMI below 50 indicates contraction of activity.
Weak PMI has aggravated people's concerns that the government's persistent efforts to tighten monetary policy are affecting economic growth. However, analysts cautioned people not to overreact, saying that the second-largest economy in the second half of the year will continue to show strong performance.
Qu Hongbin, chief economist at HSBC China, said that "the flexibility of consumer spending and the continued investment in a large number of infrastructure projects" will support China's economic growth for the rest of the year, keeping the growth rate at about 9%. In the first half of this year, China’s economy expanded by 9.6%, making it the fastest growing large economy in the world.
Chinese Premier Wen Jiabao said last week that the government must strike a balance between curbing price pressures and preventing severe fluctuations in economic growth.
Confronted with the highest inflation in three years, the People's Bank of China has steadily tightened its policy over the past nine months. So far, it has raised interest rates five times and raised bank deposit reserve ratio nine times.
Even after all these measures are taken, inflation is still a stubborn opponent. HSBC's PMI preview shows that input costs rebounded in July. However, if the manufacturing slowdown continues to deepen, it may prompt the Chinese government to suspend its tightening policy.
On Thursday, China's main stock index, the Shanghai Composite Index fell 1%, which is the fourth consecutive decline in the index, reflecting the market's worries about the outlook.
The state-owned China Development Bank (CDB) stated that it has cancelled the issuance of a bond issue scheduled for Friday. The bank did not explain the reasons, but the PBOC’s tightening actions have taken away cash from the Chinese currency market, resulting in a series of short-term debt auctions that have been under-subscribed in recent weeks.
From a more long-term perspective, the International Monetary Fund (IMF) stated in its annual report on China’s economy that China’s economy is still “steadyâ€, partly because employment and wage growth have boosted domestic consumption. However, the IMF warned that food price-driven inflation, housing bubbles, and declining credit quality all pose risks.
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