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China PMI falls, but indicates soft landing

11-02-2011 08:40 BJT

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It’s the start of a new month and that means its PMI time - a leading indicator closely watched by investors and analysts to determine the health of economies.

The latest figure shows moderating manufacturing activity. It slowed by the most since February 2009, but did manage to stay above 50, the line that separates growth from contraction. Analysts interpret it as a further slowing of the Chinese economy, but say no fears of a hard landing - they forecast GDP growth will stay on track.

The official Purchasing Managers Index fell to 50.4 in October, dropping 0.8 points from September. The figure confounded market expectations of 51.6, a third straight month of rising activity. Experts say though, that full-year GDP growth is still likely to come in at around 9.2%, an appropriate rate given the government’s control measures.

Zhang Liqun, State Council Dev’t & Research Center, said, "Judged by these figures, we can expect growth of the national economy continues to slow, which is a result of government policies. GDP growth of first quarter was 9.7 percent, third quarter 9.1 percent; the total decline is within one percentage points. The growth rate may go down further, but wouldn’t see a sharp decrease."

Private sector PMI though, rose in October to 51 from 49.9 in September, showing signs of a bounce back at small firms. Experts say small companies have proved resilient.

Caijin, deputy director of China Federation of Logistics & Purchasing, said, "Small companies have returned to the picture, thanks to a series of policies to support their development that finally started to take effect in October. Moreover, this is just the beginning of a trend; we can expect further growth in the sector. This is very good for the national economy to keep a steady growth. "

Taken together, the PMIs back the view that China will keep interest rates on hold as the government continues its fight against inflation.

 

Editor:Zhang Dan |Source: CNTV.CN

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