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Economy

China's manufacturing expands at a slower pace

(Agencies)
Updated: 2010-07-01 10:48
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China's manufacturing expanded at a slower pace for a second month in June, adding to signs that growth in the world's third-largest economy is moderating.

The Purchasing Managers' Index fell to 52.1 from 53.9 in May, the Federation of Logistics and Purchasing said in an e-mailed statement Thursday. That was less than the median 53.2 estimate in a Bloomberg News survey of 12 economists. [PMI of manufacturing sector falls to 52.1%]

The figures indicate the government is succeeding in tempering an expansion that hit an 11.9 percent annual pace in the first quarter, which threatened to inflate consumer and asset prices. Signs of the slowdown have unsettled investors around the world because limited demand in advanced economies has left global growth reliant on emerging markets, led by China. Asian stocks headed for a third day of losses.

"China's growth is off the peak and will gradually cool," Qu Hongbin, a Hong Kong-based economist at HSBC Holdings Plc, said before the release on Thursday. "Still, this is just a slowdown to a more sustainable rate rather than a meltdown."

Qu said "resilient" private consumption and government spending on public housing will help to sustain growth.

That outlook hasn't been shared by investors, who sent the Shanghai Composite Index to drop for a seventh day, the longest losing streak in 18 months. [China's stocks drop for seventh day] The MSCI Asia Pacific Index dropped 0.9 percent as of 8:52 am in Hong Kong. The world is relying on China to help sustain a recovery that Group of 20 leaders this week described as "uneven and fragile."

Autos, electronics

The manufacturing index, released by the logistics federation and the Beijing-based National Bureau of Statistics, covers more than 730 companies in 20 industries, including energy, metallurgy, textiles, automobiles and electronics.

Related readings:
China's manufacturing expands at a slower pace Economy likely to maintain steady, rapid growth: PBOC
China's manufacturing expands at a slower pace Wen: economy heading in right direction, 'relatively fast' growth seen
China's manufacturing expands at a slower pace Economy progressing on right path
China's manufacturing expands at a slower pace China's economy 'cannot drive global growth'

On June 29, the New York-based Conference Board corrected its leading economic index for China to show the smallest gain in five months in April, fueling investors' concerns that growth is easing and adding to signs of weakness worldwide. Europe's manufacturing and services expansion slowed in June and Japan's industrial production and household spending slipped in May.

Baosteel Group Corp, China's second-biggest steelmaker, this week scaled back its growth plans, cutting its target for capacity in 2012 by 38 percent.[Baosteel targets 66m-ton capacity by 2015]

In China, policy makers have spent the first half of the year seeking to prevent property-price bubbles and contain inflation, which surpassed the government's full-year target of 3 percent in May. So far, the winding back of the stimulus has not included an interest-rate increase.

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