Fac­tory data points to slow­down in China

The Star Early Edition - - BUSINESS REPORT - Reuters

GROWTH in China’s man­u­fac­tur­ing sec­tor slowed marginally in July, re­in­forc­ing ex­pec­ta­tions the world’s sec­ond-largest econ­omy will cool in com­ing months as bor­row­ing costs rise and reg­u­la­tors clamp down on riskier types of fi­nanc­ing.

The of­fi­cial Pur­chas­ing Man­agers’ In­dex (PMI) re­leased yes­ter­day stood at 51.4 in July, down from the pre­vi­ous month’s 51.7 but still well above the 50-point mark that sep­a­rates growth from con­trac­tion on a monthly ba­sis.

An­a­lysts sur­veyed by Reuters had fore­cast the read­ing would come in at 51.6, lit­tle changed from June.

China posted stronger-than-ex­pected eco­nomic growth of 6.9 per­cent in the first half, fu­elled by a year-long con­struc­tion boom, resur­gent ex­ports and ro­bust re­tail sales.

The sub-in­dex for the con­struc­tion sec­tor rose to 62.5 in July from 61.4 in June, the PMI sur­vey by the Na­tional Bureau of Statis­tics showed.

The con­struc­tion sec­tor re­mains ro­bust as the gov­ern­ment strength­ened in­vest­ment in in­fra­struc­ture projects, the statis­tics bureau said.

But new fac­tory or­ders eased to 52.8 from 53.1 in June, with ex­port or­ders fall­ing to 50.9 from 52.

“The break­down sug­gests weaker for­eign de­mand is partly to blame – the new ex­port or­ders fell by a larger mar­gin than over­all new or­ders,” said Ju­lian Evans-Pritchard, a Sin­ga­pore-based China econ­o­mist at Cap­i­tal Eco­nom­ics.

The sub-in­dex for im­ports slipped marginally to 51.1 in July from 51.2 a month ear­lier, sug­gest­ing sta­ble do­mes­tic de­mand.

Econ­o­mists ex­pect the pace of China’s growth to slow slightly in the sec­ond half.

Higher bank-fund­ing costs seen in the first half will fil­ter through into the real econ­omy even­tu­ally, they ar­gue, while the red-hot prop­erty mar­ket is show­ing some signs of mod­er­at­ing af­ter waves of gov­ern­ment cool­ing mea­sures.

Ser­vices sec­tor

Growth in the ser­vices sec­tor also cooled in July, fall­ing to 54.5 from a three-month high of 54.9 in June, another of­fi­cial NBS sur­vey found.

China’s lead­ers are count­ing on growth in ser­vices and con­sump­tion to re­bal­ance their eco­nomic growth model from its heavy re­liance on in­vest­ment and ex­ports.

Al­though the PMI data hinted at a slow­down, Bei­jing is still ex­pected eas­ily to meet its an­nual eco­nomic growth tar­get of 6.5 per­cent for the full year – en­cour­ag­ing news for Pres­i­dent Xi Jin­ping be­fore a ma­jor lead­er­ship reshuf­fle in the au­tumn.

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