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China's economic growth well on recovery track

11-26-2012 14:18 BJT

By Yang Lina

BEIJING, Nov. 26 (Xinhuanet) -- The HSBC Flash China Manufacturing Purchasing Managers' Index (PMI), a measure of factory activities, shot up to 50.4 in November from 49.5 in October, according to figures released by HSBC.

It is the first time the non-official index jumped back to the expansionary territory in 13 months, as a reading above 50 suggests expansion, while a reading below 50 indicates contraction.

The rise is consistent with the Chinese official PMI, which rose to 50.2 percent in October from 49.8 percent in September.

Experts, taking this as a latest sign of recovery, say that China's economy is on the track of modest rebound and that the growth in the remainder of the year will be more robust so that it is all but certain the economic target set for 2012 will be achieved.


Analysts said that November was the slack season of manufacturing traditionally as the HSBC PMI in November dropped 1.4 percentage points month-on-month on average during the 2006 and 2011 period.

However, the PMI figure this November jumped to a 13-month record high and bounced back above the expansion demarcation line, indicating that the manufacturing industry was not as bleak as it used to be.

Experts say that the HSBC preliminary reading, which has increased for four months in a row, suggests that the manufacturing activity of small- and medium-sized enterprises has picked up.

"The November flash reading of HSBC manufacturing PMI confirms again that the economic recovery continues to gain momentum toward the year end," said Qu Hongbin, chief economist for HSBC China.

Lian Ping, chief economist with the Bank of Communications, said, "The recently released economic data has been turning around, suggesting the economic growth is on the mend."

"The Chinese economy is stabilizing and moving upwards," said Zhuang Jian, an economist at Asian Development Bank.

Apart from the PMI reading, investment, export, consumption and industrial production in recent two months all had better performance, verifying the forecast for recovery, according to experts.


China's gross domestic product (GDP) has dropped for seven consecutive quarters since 2011, but as the impetus for growth is on the rise, the GDP of the fourth quarter will take a turn for the better and the economic growth of the whole year will be around 7.8 percent, according to industry watchers.

Chinese economy will rebound slightly and the year-on-year growth rate will rise to 7.7 percent to 7.8 percent in the fourth quarter from 7.4 percent in the third quarter, said Wang Yiming, deputy director of Macroeconomic Research Institute of the National Development and Reform Commission.

The recovery has been underway since September due to a series of macroeconomic policies and recovering global market demand, said Zhang Liqun, a State Council Development Research Center analyst said.

Internally, Lian Ping said, the domestic demand will pick up in the fourth quarter, thus further driving up the economic growth.

And externally, as the European debt crisis got alleviated gradually and the situation of consumption, housing, employment and stock markets in the U.S. was improved, the global economic situation will be better than in the first half of the year, which will be conducive to the recovery of China's export industry.

Therefore, Lian said, "In the short term, it will be all the more certain that the economic growth in the fourth quarter will be on the rise."

He predicted that the economic growth in the fourth quarter will be between 7.8 percent and 8 percent, and the growth for the whole year will be around 8 percent. Taking into consideration of the continuation of the recovery in the fourth quarter, the economic growth in the next year will shore up to 8 percent to 8.5 percent.

Ma Jun, Deutsche Bank's Chief Economist for Greater China, held the similar view, saying that although China's export was dim due to the dwindled demand from Europe and the U.S., stable economic growth was still predictable as the recent recovery didn't rely on the export.


At the same time, some analysts pointed out that the PMI sub-index on new orders only inched up 0.1 percentage points, demonstrating that the momentum for bouncing back is not very stable.

Zhou Xiaochuan, governor of the People's Bank of China or the central bank, said that the global financial crisis will not be over soon, and new problems like the U.S. fiscal cliff will overcast the global economic development and bring more uncertainties to the Chinese economy.

Qu Hongbin said that as China is at the early stage of recovery and the global economic growth is still fragile, a rosy prospect for external demand is too early to say.

Moreover, the PMI reading of 50.4 was still lower than its average level of 51.7, and the sub-index on employment was below 50.

Hence, Qu called for a continuation of policy easing from Chinese policymakers to avoid a W-shaped recovery, or double-dip recovery.

His view was echoed by some other economists who believed that China should maintain liquidity via open market operations or reserve requirement ratio (RRR) cuts on the premise that inflation is well under control.

Lian Ping, who said that the policies for stabilizing growth should continue to be implemented, among which the fiscal policy should be neither too tight nor too relax and doesn’t need to be adjusted dramatically for the time being.

Editor:Zhang Hao |Source:

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