China’s manufacturing shriveled because of less demand for exports
Based on a survey, because of recessions in the US, Europe and Japan less demand for exports, China’s manufacturing contracted for a fifth month in December.
The CLSA China Purchasing Managers’ Index stood at a seasonally adjusted 41.2, compared with a record low of 40.9 in November, according to CLSA Asia Pacific Markets last Friday in an emailed statement. The index which is below 50 reflects a contraction.
Manufacturers in industries such as metals and toys are reducing production or closing down. Aluminum Corp of China Ltd, the nation’s biggest maker of the metal, and Yunnan Tin Co, the world’s largest producer of tin, cut output as prices fell.
Eric Fishwick, head of economic research at CLSA in Singapore said that Chinese manufacturing was very weak in December. “With five back-to-back PMIs signaling contraction, the manufacturing sector, which accounts for 43 percent of the Chinese economy, is close to technical recession.”
The output index fell to a record low of 38.6 last month from 39.2 in November, while the measure of new orders rose to 37 from 36.1. The index of export orders jumped to 33.6 from 28.2, CLSA said.
The report said that Chinese manufacturers shrink with a high speed. An employment index which was tracked by CLSA showed that the index decreased for five consecutive months to 45.2 in December.
China’s economic growth reached the weakest pace in at least 15 years, which was only 5.5% last quarter, according to Shanghai-based Industrial Bank Co.
The recession of economy may make central bank keep cutting interest rates after five reductions in three months and as the government announced 4 trillion yuan ($586 billion) stimulus package in November.
A “flexible” monetary policy was pledged to continue by Central bank Governor Zhou Xiaochuan on Dec 31. Capital Economics Ltd forecasts the key one-year lending rate will fall by at least 81 basis points from 5.31 percent in the first half of this year.
Central bank Vice-Governor Yi Gang said on Dec 26 that a severe slowdown in industrial-output growth is mainly caused by companies running down excess inventory. That process won’t conclude until the end of the second quarter, Yi added.
Exports and imports both got huge impact and industrial output grew at the slowest pace in almost a decade. The government has announced the stimulus package, interest-rate cutting and reductions in export taxes to deal with the worsening slowdown
The yuan’s gains against the dollar have also stalled since mid-July. A weaker currency helps exporters by keeping down prices in overseas markets.
It is said that China need to boost consumption and prepare more measures to tackle thee crisis. The central bank reaffirmed a “moderately loose” monetary policy.
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