Bloomberg News

China’s Manufacturing Index Rises to Four-Month High on Exports

October 01, 2011

Oct. 2 (Bloomberg) -- A Chinese manufacturing index advanced for a second month in September, as a measure of new export orders rebounded to the highest level since May.

The Purchasing Managers’ Index was at 51.2, compared with 50.9 in August, the China Federation of Logistics and Purchasing said in a statement yesterday. The median estimate in a Bloomberg News survey of 13 economists was for a reading of 51.1. A level above 50 indicates expansion.

September’s manufacturing reading, the highest in four months, suggests the world’s second-largest economy is weathering Premier Wen Jiabao’s campaign against inflation that has included higher interest rates, lending curbs and home- purchase limits. Room for further tightening may be limited by a heightened risk of recession in the U.S. and euro-area economies and the impact of that on Chinese exports.

“The PMI should be relatively positive for the market, which is increasingly receptive to overly bearish calls,” said Lu Ting, a Hong Kong-based economist at Bank of America Merrill Lynch. “China’s growth is slowing at a gradual pace,” he said. “A hard landing is of small probability.”

The manufacturing index compiled by the logistics federation and National Bureau of Statistics is based on a survey of purchasing managers in more than 820 companies in 20 industries. It hasn’t fallen below 50 since February 2009.

In contrast, a separate manufacturing index released Sept. 30 by HSBC Holdings Plc and Markit Economics indicated a third straight month of contraction. The reading of 49.9 was unchanged from August and higher than the preliminary figure of 49.4.


HSBC’s index, which reflects a survey of more than 400 companies, is weighted toward small businesses that have been hit harder by the government’s tightening measures, according to economists including Merrill Lynch’s Lu and Australia and New Zealand Banking Group Ltd.’s Liu Li-Gang. The official PMI has a greater focus on larger enterprises, they say.

China’s benchmark Shanghai Composite Index fell on Sept. 30 to its lowest close since April 2009 on concerns that the nation’s growth is slowing and Greece may default on its debt. The gauge sank 15 percent in the July-to-September period, the biggest drop since the second quarter of 2010. Chinese markets are closed next week for the National Day holiday.

The data released yesterday by the logistics federation and statistics bureau showed that the measure of new export orders climbed to 50.9 from 48.3 in August. A gauge of input prices declined to 56.6 from 57.2 and the employment index gained to 51, the highest level since April.

‘Good News’

“Good news is that export orders rebounded to above 50 and the input price index declined,” said Shen Jianguang, chief Greater China economist for Mizuho Securities Asia Ltd. Economic growth may slow to 9 percent on year in the third quarter, with the possibility of a “hard landing” still “unlikely,” said Shen, who previously worked for institutions including the International Monetary Fund and the European Central Bank.

Fifty-nine percent of respondents in the quarterly Bloomberg Global Poll of investors, analysts and traders who are Bloomberg subscribers said economic growth in China may decline to less than 5 percent annually by 2016. Growth was 9.5 percent in the second quarter.

Premier Wen, speaking at a banquet Sept. 30 in Beijing marking the weeklong National Day holiday that celebrates the start of Communist rule in China in 1949, said that relatively fast increases in consumer prices have been controlled. The government aims to keep prices basically stable and to further implement property control measures and policies for the construction of social housing projects, he said.

No Policy Easing

Merrill Lynch’s Lu said China has “no reason” to ease monetary policy at the moment. Inflation in China rose to a three-year high of 6.5 percent in July before moderating in August to 6.2 percent. The People’s Bank of China has raised interest rates five times and increased the reserve requirement nine times in the past 12 months.

The statistics bureau is scheduled to release inflation data for September on Oct. 14 and gross domestic product figures for the third quarter on Oct. 18.

China should be prepared for “the worst of a eurozone crisis,” which could cause a “hard landing” in the nation, Lu said. The financial woes in Europe and the U.S. may also result in a lower reading for new export orders in October after the “surprise” level see in September, he said.

“The headwinds in the global economy will be felt by China’s exporters in the coming months,” Lu said.

--Victoria Ruan, with assistance from Jessica Zhou and Michael Forsythe in Beijing and Marco Lui in Hong Kong. Editors: John Liu, Paul Tighe

To contact Bloomberg News staff for this story: Victoria Ruan in Beijing at

To contact the editor responsible for this story: Paul Panckhurst at

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