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HSBC PMI: Manufacturing contracts for 3rd month

01-21-2012 10:56 BJT

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A private survey of Chinese manufacturers suggests the nation's factory activity is likely to have started the year sluggishly. This makes it the third contraction in as many months. The HSBC Flash China Purchasing Managers Index for January fell below the 50 threshold that demarcates growth from contraction.

The reading on the index stood at 48.8 in the month. That’s actually the highest level in three months and did improve a little compared to December’s final reading. Sub-indexes for new export orders, backlogs of work and stocks of finished goods also showed some turnaround.

So, what does this all mean?

Analysts say the flash reading suggests China’s growth may moderate further. They’re citing industrial output growth of around 11-12 percent in the coming months, and overall economic expansion of around eight percent for the first quarter. They say all this could trigger the government to fine-tune policy.

According to a source with knowledge of the matter, China has allowed its five biggest banks to boost first-quarter lending. It could also relax capital requirements. The HSBC PMI survey mainly covers small and medium-sized Chinese companies.


Editor:Zhang Rui |Source: CNTV.CN

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