China HSBC Flash PMI points to tepid Q2 recovery
Apr-30-2013 By : agxadmin
Growth in China’s factory sector dipped in April as new export orders shrank, suggesting the Chinese economy still faces formidable global headwinds into the second quarter. The flash HSBC Purchasing Managers’ Index for April fell to 50.5 from 51.6 in March but was still stronger than February’s reading of 50.4. A sub-index measuring new export orders fell to 48.6 in April from 50.5 in March, reflecting weaker global demand as the U.S. economic recovery remains fragile and the euro zone is mired in recession. The latest PMI data may overshadow China’s recovery in the second quarter after growth unexpectedly slowed to 7.7% in the first quarter from 7.9% in the previous three months. Still, the HSBC PMI has been above the 50-point level demarcating growth from contraction from the previous month since November last year, though its failure to break above 53 indicates that the economic expansion is only moderate. “New export orders contracted after a temporary rebound in March, suggesting external demand for China’s exporters remains weak,” said HSBC’s China Chief Economist Qu Hongbin. Sub-indexes measuring both input and output prices fell in April, indicating overcapacity upstream and soft demand, according to the Flash PMI survey. An employment sub-index also dipped as factory activity cooled. The latest Reuters poll showed China’s economic growth could pick up in the second quarter as the government boosts infrastructure spending. A researcher from the Ministry of Finance said that stimulus on the scale of that in 2008 was not necessary, as the economy shows an overall stable trend. China has set a 7.5% GDP growth target for this year, a level Beijing deems sufficient for job creation while providing room to deliver structural adjustment. The final HSBC manufacturing PMI is scheduled to be published on May 2, a day after the official PMI, the South China Morning Post reports.
Zhang Zhiwei, Economist at Nomura, said it is rare for China’s manufacturing to weaken in April which normally sees stronger industrial activity. Over the past seven years, the PMI in April has risen five times, fallen once and was flat once. Nomura projected that China’s economic growth has peaked in the first three months of this year at 7.7%, and will trend lower to 7.5%, 7.4% and 7.2% in the following three quarters. Xiao Chunquan, Spokesman for the Ministry of Industry and Information Technology (MIIT), warned of “great difficulties for the economy to maintain a stable growth”. He cited “a lack of effective demand, companies’ reluctance to invest, serious problems with excess capacity, and a difficult operating environment for small and micro-sized companies”. Falling profitability had curbed companies’ willingness to expand, Xiao said. Nearly 21% of the companies tracked by the government had suffered losses while those in profit were earning less than a few years ago, he said.
Industrial growth slows to 9.5%
By : agxadmin
China’s industry is still struggling to recover, according to the Ministry of Industry and Information Technology (MIIT). In the first quarter, industry saw 9.5% value-added growth year-on-year, slower than the 10% seen in the previous quarter, and even slower than the 11.6% in the first quarter of 2012. Economists warned that the sector’s slower growth may force the country to rely more on growth driven by capital investment, resulting in an even greater challenge to its plan to rely increasingly on domestic consumption. Heavy industry registered 9.8% value-added growth year-on-year, while light industry saw 8.7%, and the technology industry saw 11.9% growth. Ministry Spokesman Xiao Chunquan said that a moderate decline should be seen as a normal phenomenon after industry’s rapid growth in the past two decades and will help ease the pressure on the environment and resources. “It also makes room for the structural adjustment of the economy,” he added. The industrial sector faces considerable pressure from a lack of robust growth in consumption as well as in the investment in fixed assets. Domestic consumption growth fell 2.4 percentage points in the first quarter from the previous year, while investment growth was on par with that of the first quarter of last year, according to the National Bureau of Statistics (NBS). In the first two months, large industrial companies saw their combined profits rise 17.2% year-on-year, but some 20% of the companies were still running at a loss. Song Guoqing, Professor of Economics at Peking University, said that GDP growth in the second quarter might hover at around 8.1%. Xiao said consumption is playing an increasingly important role in supporting growth. He highlighted the role played by the IT sector. China’s e-commerce sector grew 45% year-on-year to CNY2.4 trillion in the first quarter, the China Daily reports.
Chinese industrial firms made total profits of CNY1.17 trillion in the first three months, the National Bureau of Statistics (NBS) said. In March, profits were CNY464.9 billion, up 5.3% from the same month last year. Among 41 sectors surveyed by the NBS, 29 reported rising profits in the first three months, while nine reported shrinking profits. Two sectors reported turnarounds in profitability and one reported a shrinking loss. The ferrous metal smelting and rolling industry reported a 3.3-fold increase in profits during the period, while profits in the electricity and heat production and supply industry leapt 90.5%. Profits for manufacturers of computers, telecoms gear and electronics were up 36.8% from the same period last year, while those in auto manufacturing rose 10.6%, agriculture and food production were up 9.9%, general equipment up 8.5% and the chemical sector increased 7.2%. On the downside, profits in coal mining dropped 40.3% while those in ferrous metal mining were down 5.2% and oil and gas exploration were off 4.5% during the same period, the report said.
Western China driving economic growth
By : agxadmin
Two provinces in western China have taken a leading position in driving the country’s economic growth in the first quarter. Yunnan province’s GDP rose 12.6% year-on-year in the first quarter, the highest among all regions. Guizhou province enjoyed an equal growth rate during the same period. “The western regions will surely be a significant driver for the economic recovery and a magnet for investment,” said Gao Guoli, Deputy Director of the Regional Economy Research Institute under the National Development and Reform Commission (NDRC). Urban fixed-asset investment in the western regions rose 24.2% in the first quarter. As growth picks up, a challenge facing the region is to reduce its high reliance on government investment, Gao said. Relatively lower land and labor costs as well as vast natural resources are presenting an advantage, as costs in coastal areas continue to grow. Foreign direct investment (FDI) in the western regions surged by 18.29% in the first quarter, in sharp contrast to the growth rate in other regions – 0.17% in eastern regions and 0.69% in central regions, according to the Ministry of Commerce (MOFCOM). Fixed-asset investment in the western regions from the private sector rose 28.8% in the first quarter. A recent joint study by the China National Textile and Apparel Council and the Swedish Embassy in Beijing showed that textile companies were shifting their factories from eastern regions to central and western parts of China.
Guangdong warned on infrastructure investment
By : agxadmin
Guangdong’s decision to invest CNY1.41 trillion to beef up its infrastructure over the next three years in 202 ongoing and 258 new transport infrastructure projects has been described as dangerous by analysts, since the province is already knee-deep in debt. “Infrastructure investment can drive economic growth, but it also creates problems. This form of economic growth is very dangerous. The Guangdong government realizes it has a debt problem, but if there is no investment, there is no growth,” said Zheng Tianxiang, Transport Professor at Sun Yat-sen University in Guangzhou. The only way to drive Guangdong’s economy was through infrastructure investment since exports to the United States and Europe had weakened and domestic consumption was not growing fast enough, Zheng said. “Corruption is inevitable in infrastructure investment. Some officials will prosper,” he added. “Increasing infrastructure construction will speed up the development of northern, southern and western Guangdong and redress the regional imbalance in Guangdong’s economy, while strengthening the economy of the Pearl River Delta,” said Guangdong Communist Party Secretary Hu Chunhua. The Guangdong government aims to increase the length of the province’s expressways to 6,800 kilometers by the end of 2015 and 8,000 km by 2017, from 5,500 km at the end of last year. The province’s rail network will reach 4,100 km in 2015 from 2,303 km in 2011. From this year to 2015, Guangdong plans to complete 17 intercity railway projects in the Pearl River Delta, with an investment of CNY111.2 billion. By the end of 2015, a 386 km rail network will cover nine Pearl River Delta cities, including Shenzhen, Guangzhou and Zhuhai. Guangdong’s massive infrastructure expenditure was manageable from a fiscal perspective, said Ivan Chung, Senior Credit Officer at Moody’s Investors Service. Last year, Guangdong reported a fiscal revenue of CNY1.47 trillion and gross regional product of CNY5.7 trillion, hence spending CNY1.41 trillion on infrastructure over three years was controllable, said Chung. As of the end of 2010, Guangdong’s debt was 16% of its GDP, below the national average of 25.9%, according to Moody’s.
China conditionally clears Marubeni/Gavilon deal
By : agxadmin
Chinese regulators have given a qualified green light to Japanese trading house Marubeni Corp’s USD5.6 billion purchase of U.S. grain merchant Gavilon, imposing stiff conditions that underscore Beijing’s anxiety over food security. The deal was announced almost a year ago but has been held up for months by Beijing’s close scrutiny of the combined group, which would have a leading role in supplying soybeans and other grains to China. U.S. and European antitrust authorities had already cleared the transaction. The Anti-Monopoly Bureau within the Ministry of Commerce (MOFCOM) said that the merger may “eliminate or limit competition in China’s soybean importing market.” Gavilon and Marubeni would be required to maintain separate, independent trading units when selling soybeans to China, with strict firewalls to prevent any exchange of market information. China, the world’s top soy importer, wants competition for soybean sales to ensure it is able to secure all the oilseeds it needs. The conditions imposed by China were surprising because it is unlikely that Marubeni and Gavilon would be able to control supplies or fix prices in such a large market, said Danny Murphy, President of the American Soybean Association. Marubeni’s USD5.6 billion acquisition of Gavilon, an amount that includes the assumption of around USD2 billion of debt, propels Japan’s fifth-largest trading house into the top ranks of global merchants. Marubeni gains access to Gavilon’s vast grain storage network as well as a significant domestic fertilizer and oil trading operation. Marubeni is already the second-largest exporter of U.S. grain to China, handling about a fifth of such exports in 2010. China’s soybean imports could approach 80 million tons within the next five to seven years, up from the record 61 million tons expected for the crop year that ends on August 31, Murphy said. China’s expected imports this year represent nearly a quarter of global soybean production. Marubeni last year was the largest soya supplier to China, exporting 10.5 million tons of the 58.4 million tons the country bought overseas, ahead of rivals Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus Commodities.
- KURT VANDEPUTTE (UMICORE) APPOINTED CHAIRMAN OF THE BOARD OF THE FLANDERS-CHINA CHAMBER OF COMMERCE (FCCC)
- Webinar: “Knowing Your Chinese Partner” – May 26, 2021, 10 am – 12 am
- EMA starts rolling review of CoronaVac, WHO approves Sinopharm vaccine for emergency use
- The Global Times warns not to politicize the Comprehensive Agreement on Investment (CAI)
- Hainan to become biggest duty-free market in the world