Surveys show slow growth in China manufacturing

[November 01, 2011]  SHANGHAI (AP) -- China's manufacturing remained sluggish in October, with a government industry group reporting the slowest growth in nearly three years, partly due to weak export orders.

The China Federation of Logistics and Purchasing said Tuesday that its monthly purchasing managers index fell an unexpectedly large 0.8 percentage point to 50.4, just above the 50-level that signifies expansion.

It forecast the economy would continue to slow in the last months of the year.

The figure "is consistent with our view that growth is losing steam," UBS economist Wang Tao said in a report. The weakness in export demand was unsurprising, she said, given the ongoing European debt crisis.

A similar survey by HSBC showed a contrary trend, with its PMI rising to 51.0 in October from 49.9 the month before. Though it reported an improvement, HSBC said the figure indicated just a "modest rate of growth."

But the HSBC's more favorable reading may reflect the survey's stronger emphasis on smaller and private companies, Wang said. Such companies have recently been the focus of efforts to relieve credit problems through new lending by banks and other policies aimed at preventing defaults on debts in the manufacturing sector from spreading.

So far, the slowing is a gradual one, with scant signs of a sharp slowdown that might sap growth in other countries looking to China to help drive demand for iron ore, machinery and other goods.

The World Bank forecasts that China's economy will grow a relatively robust 9.3 percent this year. But most economists are forecasting a drop to below 9 percent growth next year, slowed by tight credit aimed at fighting inflation and weak export demand.

In September, China's exports to the 27-nation European Union, China's biggest trading partner, fell 9.7 percent from a year earlier.

The Federation of Logistics and Purchasing said its survey showed a decline both in import and export orders.

"There are clear signs of uncertainty in global markets that are impacting China's economy. The European and U.S. debt crisis has continued to worsen, the global recovery is still weak and unsteady," it said.

China's leaders have pledged to selectively ease tight controls on bank lending and other policies aimed at fighting inflation, to help support growth.

The purchasing managers surveys for October did show significant progress in bringing prices lower, with the purchasing price index falling by more than 10 percentage points to 46.2, well below 50.

Lower prices for raw materials also would help relieve pressures on manufacturers struggling to turn profits at a time of intense price pressure and rising costs.

"Inflation is on track for easing. This provides leeway for Beijing to fine-tune policy to strike a better balance between growth and inflation priorities," said HSBC economist Hongbin Qu.

[Associated Press; By ELAINE KURTENBACH]

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