Money Matters, Simplified.
China’s manufacturing declines for 8th successive month
by Jamie Anderson - April 1, 2009 - comments
Workers seen at a manufacturing unit in Beijing. China has witnessed a fall in manufacturing for the eighth successive month
Beijing, April 1: The economic recession has spared none. The manufacturing sector of China, the world's third-largest economy, shrank for the eighth month on the trot.
The CLSA China’s index for gauging manufacturing activity, dropped for the eight successive month in March. Collapsing global trade and diminishing exports were the primary reason behind the fall of CLSA from 45.1 in February to 44.8 in March.
A figure under 50 in CLSA is a sign of contraction. Likewise, a reading above 50 indicates growth and expansion. This fall in CLSA underlines the perils involved when companies enhance orders in anticipation of, rather than in response to, government projects.
Eric Fishwick, head of economic research at CLSA, said of the drop, “A worsening of domestic manufacturing orders lies behind the drop in the Purchasing Managers' Index and accords with what we are seeing on the ground in the steel industry.”
President Hu Jintao claimed that the 4 trillion yuan ($585 billion) stimulus package rolled out by the Chinese government has started yielding results. He was optimistic that the economy could sustain stable and swift growth.
Referring to the slowdown in the Chinese economy, Jing Ulrich, chairman of China equities at JPMorgan in Hong Kong, said, “Although China's proactive monetary and fiscal policies are yielding positive results, the country's economic recovery is still in first gear."
Some analysts feel that there is a silver lining so far as the Chinese economy is concerned. The sub-indexes for output, new export orders and employment have all strengthened.
Urban fixed-asset investment increased 26.5 percent in the first two months from the comparative period last year. New bank lending increased four times and vehicle sales jumped 25 percent in February.
Andy Rothman, CLSA's China economist, echoes optimism, “We continue to believe that the Chinese economy is on track for significant acceleration in the second half of the year."
The surveys conducted suggest that the rate of decline in the manufacturing sector have bottomed out in the last couple of months of last year. The short term viewpoint remains doubtful though.