China HSBC Dec flash manufacturing PMI firms to 50.9

BEIJING Fri Dec 14, 2012 2:44pm IST

Labourers wearing masks work on a giant granite rock amid dust as they make a stone carving at a factory in Chongwu township, Fujian province October 25, 2012. REUTERS/Stringer/Files

Labourers wearing masks work on a giant granite rock amid dust as they make a stone carving at a factory in Chongwu township, Fujian province October 25, 2012.

Credit: Reuters/Stringer/Files

Related Topics

BEIJING (Reuters) - Growth in China's vast manufacturing sector picked up in December, a preliminary private survey showed, with rises in areas such as new orders and employment underlining a brighter outlook for the economy in coming months.

The HSBC flash purchasing managers' index for December rose to 50.9, a 14-month high and the fifth straight monthly gain. A figure above 50 indicates that growth is accelerating, while one below 50 shows slowing growth.

The flash survey -- issued earlier in the month than usual ahead of the Christmas holidays -- follows a raft of data that suggest annual economic growth has quickened in the fourth quarter after it slowed for seven consecutive quarters to 7.4 percent. Still, China is on track this year for its slowest full-year growth since 1999.

Improving conditions are primarily driven by domestic demand, said Hongbin Qu, China chief economist at HSBC.

"The drop of new export orders and the downside surprise of November exports growth suggest the persisting external headwinds. This calls for Beijing to keep an accommodative policy stance to counter-balance the external weakness, provided inflation stays benign," Qu added.

Most sub-indexes improved with the exception of output and new export orders, which dipped, possibly reflecting softer end-of-year orders. Encouragingly, a sub-index on new orders rose for the fifth month in a row to 52.7, its highest level since April 2011.

The PMI figures also suggested some improvement in margins for manufacturers as a sub-index tracking output prices rose while one tracking input prices fell. A sub-index tracking employment rose to its highest level since February.

Government data earlier this week showed industrial production growth in November jumped to an eight-month high while inflation ticked up from 33-month lows.

The data added to the view a long slide in economic growth was over, although other figures suggest a recovery will be bumpy.

November exports were unexpectedly weak, slowing to less than 3 percent annual growth compared with 11.6 percent in October. That could hit the firms concentrated in China's coastal export hubs, where private firms account for much of new hiring and new government revenues.

LOOSER CREDIT

China has loosened the reins on credit this year to help the economy revive, with money flowing through channels outside the traditional state-controlled banks. Trust loans and corporate bonds are increasingly important sources of financing for private businesses and real estate developers, but usually come with higher interest rates.

Total social financing -- a Chinese measure of credit available in the economy -- is on course to hit a record of 15 trillion yuan this year, up 17 percent from 2011.

However, the November total for social financing slipped compared with October, raising another doubt about the strength of the rebound.

"These figures underline that the credit loosening that has helped fuel the economic rebound of recent months is still far more tentative than in earlier expansions," Capital Economics analyst Qinwei Wang said.

The diversification of funding sources may help smaller businesses but alarms critics and banking industry executives, who warn that there is very little transparency on where the loans are going. Lower-interest bank loans and depositors' savings are also flowing into shadow banking as part of a broad arbitrage between the official and gray-market interest rates.

The Chinese government will hold an economic policy planning meeting this weekend, which will set direction for the coming year. It is expected to maintain the 2012 target of 7.5 percent GDP growth.

Earlier on Friday, the State Information Center, a government-backed think tank, called for an increased central government deficit and broader value added tax reforms in 2013.

(Editing by Jonathan Standing)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Back to Investors

REUTERS SHOWCASE

Health Reforms

Health Reforms

India reviews state hospitals to end widespread corruption.  Full Article 

New Rules

New Rules

RBI says all companies must apply 2-step payments for credit cards.  Full Article 

Still Popular

Still Popular

Indians keep faith with Modi, best hope for economy - poll.  Full Article 

New Adviser

New Adviser

Arvind Subramanian likely to be chief econ adviser.  Full Article 

Pricing Mechanism

Pricing Mechanism

Govt sets up a four-member panel to re-examine gas pricing.  Full Article 

Royalty Rates

Royalty Rates

India to hike iron ore royalty, miners may struggle to pass on extra cost.  Full Article 

Diesel Deregulation

Diesel Deregulation

Oil ministry to seek Cabinet nod on diesel deregulation - sources  Full Article 

Commodities

Commodities

Gold near two-month low; set for weekly drop on interest rate fears  Full Article 

Helping Regional Mills

Helping Regional Mills

Govt raises sugar import duty to 25 pct from 15 pct.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage