China Manufacturing Gauge Falls to 6 Month Low


A Chinese manufacturing gauge fell to a six-month low in January as output and orders slowed, adding to signs that government efforts to rein in excessive credit will cool growth in the world’s second-largest economy.

The Purchasing Managers’ Index (SHCOMP) was at 50.5, the National Bureau of Statistics and China Federation of Logistics and Purchasing said Feb. 1 in Beijing. That matched the median estimate of analysts surveyed by Bloomberg News and compared with December’s 51 reading. Numbers above 50 signal expansion.

The survey showed jobs and export orders shrinking, amplifying risks of a deeperslowdown as Communist Party leaders clamp down on the $6 trillion shadow-banking industry and interbank borrowing costs rise. A separate manufacturing gauge released by HSBC Holdings Plc and Markit Economics on Jan. 30 pointed to the first contraction in six months.

“There is no doubt that the surging money-market rates have added uncertainty and dampened industry confidence,” said Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. The central bank will “have to strike a delicate balance” between cracking down on shadow banking and maintaining financial stability, Liu said.

Services Weaken

A separate report released today on the non-manufacturing sector also showed a deterioration, with that PMI falling to 53.4 in January from 54.6 in December.

Estimates for the official manufacturing PMI from 31 economists ranged from 50 to 50.9. The benchmark Shanghai Composite Index fell 0.8 percent on Jan. 30, capping the worst start to a year since 2010, on concern the economy is slowing as the U.S. Federal Reserve cuts stimulus. China’s markets are closed for the Lunar New Year holiday from Jan. 31 to Feb. 6.

A gauge of output in January fell to a four-month low of 53 from 53.9, while the new-orders index (EC11CHPM) declined to a six-month low of 50.9 from 52.0, according to government data.

The survey suggested manufacturing jobs are shrinking at a faster pace, with a gauge of employment declining to 48.2, the lowest since February 2013. HSBC’s survey showed companies eliminating jobs at the fastest rate in almost five years.

HSBC’s broader index, which showed a reading of 49.5 for January, is based on responses from more than 420 manufacturers and is weighted more toward smaller companies. The official PMI is based on questionnaires sent to about 3,000 companies.

Credit Tightens

Borrowing costs remain elevated, with the benchmark seven-day repurchase rate at 4.98 percent on Jan. 30, according to a daily fixing compiled by the National Interbank Funding Center, compared with the month’s average of 4.7 percent.

“Growth may continue to slow in the next couple of quarters due to generally tighter credit conditions, amid government efforts to contain local government debt and regulate shadow banking,” said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong. The PMI data suggest that a “gradual deceleration of economic activity continued at the beginning of the year,” said Ding, who previously worked at the International Monetary Fund.

China’s government-sponsored PMI has stronger representation of large companies and state-owned enterprises that serve the domestic market than the one prepared by Markit and HSBC, according to Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong.

The decline in January’s PMI was mainly due to the approach of the Lunar New Year holiday, Zhao Qinghe, a statistician at the statistics bureau, said in a statement Feb. 1. China’s operating environment for production will improve in 2014, Zhao said.

Holiday Impact

Citigroup’s Ding said the decline in January’s official PMI is “partially seasonal” because of the holiday, whose timing shifts every year.

Last year, the PMI fell to 50.4 in January and 50.1 in February, when the holiday took place. The index rose to 50.5 in January 2012, when that year’s new year festival occurred, from December 2011’s 50.3 and November 2011’s reading of 49.

Reports on Feb. 1 from China and South Korea point to a slowdown in global demand. China’s PMI survey showed export orders shrinking at a faster pace, with a reading of 49.3, the lowest since July. South Koreanexports unexpectedly fell 0.2 percent last month from a year earlier, compared with the median estimate for a 1.5 percent increase in a Bloomberg News survey of analysts.

China’s economy grew 7.7 percent in 2013, the same rate as in 2012. Growth is forecast to be 7.4 percent this year, the slowest pace since 1990, based on the median estimate in a Bloomberg News survey.

Investment Products

China Credit Trust Co. reached an agreement last week to repay bailed-out trust holders in a high-yield product whose threatened failure spurred concern that financial stresses and defaults will mount in the nation’s $1.7 trillion trust industry.

Tianjin FAW Xiali Automobile Co. said last month it will report a net loss of 430 million yuan ($71 million) to 530 million yuan for 2013. The Tianjin-based company cited declining production and sales at its holding company Tianjin FAW Toyota Motor Co. as the main reason for the loss.

  • Indian Bridal Set Rentals

    You will be an ocean of information, otherwise how is it achievable to write and express your opinion on every topic so effortlessly. Bow ahead of you!

  • luxury furniture

    Hello, Neat post. There’s an issue together with your site in web explorer, would check this¡K IE nonetheless is the marketplace leader and a large part of folks will omit your great writing due to this problem.

  • Hi, i think that i saw you visited my web site thus i came to “return the favor”.I’m trying to find things to improve my website!I suppose its ok to use some of your ideas!!

  • I’ve been browsing online more than three hours today, yet I never found any interesting article like yours. It is pretty worth enough for me. In my view, if all web owners and bloggers made good content as you did, the web will be a lot more useful than ever before.

  • Great post. I was checking continuously this blog and I’m impressed! Extremely helpful info particularly the last part 🙂 I care for such info a lot. I was seeking this particular info for a very long time. Thank you and good luck.

  • Thanks for every one of your effort on this site. Betty really likes carrying out investigations and it’s really simple to grasp why. A lot of people hear all relating to the lively mode you produce both interesting and useful guidelines via this web blog and as well as inspire participation from the others on this point so our daughter is without a doubt being taught a lot. Enjoy the rest of the year. You have been doing a great job.

  • I¡¦m no longer certain the place you are getting your info, however good topic. I must spend a while studying more or working out more. Thank you for wonderful info I used to be on the lookout for this info for my mission.

  • Good blog! I really love how it is simple on my eyes and the data are well written. I’m wondering how I could be notified whenever a new post has been made. I’ve subscribed to your RSS feed which must do the trick! Have a great day!

  • As I site possessor I believe the content material here is rattling excellent , appreciate it for your efforts. You should keep it up forever! Good Luck.

  • Wow, incredible weblog structure! How long have you been blogging for? you make blogging look easy. The total glance of your site is wonderful, as smartly as the content!