China Sustains Expansion as Exports Climb, Price Pressures Grow
2010-02-01 03:11:17.480 GMT
By Bloomberg News
Feb. 1 (Bloomberg) -- China, the world's third-biggest
economy, sustained its manufacturing expansion in January as
export orders jumped and inflation pressures grew, two surveys
showed today.
A purchasing managers' index released by HSBC Holdings Plc
and Markit Economics rose to a record. A second survey, by the
Federation of Logistics and Purchasing, recorded the second-
fastest expansion since 2008.
Stocks tumbled as the reports spurred concern that the
government will have to escalate efforts to rein in the credit
growth that has fueled the nation's infrastructure spending
surge. After raising banks' reserve requirements this month and
targeting reduced credit growth in 2010, policy makers may raise
interest rates by the end of June, according to the median
estimate in a Bloomberg News survey of economists.
"It's a solidly expansionary reading, consistent with
expectations of continued momentum in the economy," said David
Cohen, an economist with Action Economics in Singapore.
The benchmark Shanghai Composite Index of stocks fell 1.5
percent as of 10:55 a.m., extending this year's slide to 10
percent.
The HSBC index rose to a seasonally adjusted 57.4 from 56.1
in December and the survey showed input and output price indexes
rose to the highest levels since July 2008. Export sales rose at
a "near-record rate," a statement on Markit's Web site said.
Meanwhile, the government-backed Purchasing Managers' Index
fell to a seasonally adjusted 55.8 from 56.6 in December, an e-
mailed statement showed. Growth in output and orders slowed,
while export demand rose more quickly.
Snowstorms
The figures may partly reflect disruptions from cold
weather and snowstorms, JPMorgan Chase & Co. and UBS AG. said.
China is paring monetary stimulus to limit inflation and
the risk of asset bubbles in the economy that Nomura Holdings
Inc. says will contribute a third of global growth this year.
China's growth accelerated to 10.7 percent, the fastest pace
since 2007, in the fourth quarter of 2009 after a 4 trillion
yuan ($586 billion) stimulus package and record lending
helped the nation lead the world out of recession.
Today's figure in the logistics federation's survey was
less than the median 56.5 estimate in a Bloomberg News survey of
16 economists. The decline was the first in eight months. The
output index dropped for the first time since May last year,
falling to 60.5 from 61.4 in December. The export-orders index
rose to 53.2 from 52.6.
'Crucial Stage'
"China's economy is at a crucial stage of moving from
rebounding to stabilizing" with exports set to make a bigger
contribution to growth, said Zhang Liqun, a researcher at the
State Council Development and Research Center. "In the meantime,
companies may face a tougher environment with rising costs and
intensified competition."
Companies benefiting from the nation's rebound include
Chongqing Changan Automobile Co., which said Jan. 27 that 2009
profit may have climbed more than 4000 percent on higher
sales and cost controls. China Railway Construction Co. said the
same day that profit likely increased more than 50 percent from
3.6 billion yuan a year earlier because of the nation's extra
infrastructure spending.
The world's third-biggest economy may gain momentum this
quarter as exports surge 30 percent, making an interest-rate
increase more likely as inflation rises, according to China
International Capital Corp. China's 10.5 percent expansion this
year will compare with the global economy's 4.2 percent, Nomura
forecasts.
Faster Pace
The nation's growth may accelerate to 12 percent this
quarter, triggering a rate increase as early as this month as
inflation rises to 3 percent, according to Sun Mingchun, an
economist at Nomura in Hong Kong.
China is pursuing a "proactive fiscal policy" and
moderately loose monetary policy," Vice Premier Li Keqiang
reaffirmed in a speech on Jan. 28 at the World Economic Forum in
Davos, Switzerland.
Such policies will lead to "huge markets for the world and
huge opportunities" for foreign companies, he said. Li's
comments reflected a pledge in November by Premier Wen Jiabao to
speed the shift from investment- and export-led growth to an
economy "driven by consumption, investment and exports in a
coordinated way."
"We expect GDP to grow by 9 percent in 2010 and our next
revision is more likely to be upward," said Wang Tao, an
economist with UBS AG in Beijing. "We expect the government to
err on the side of keeping policy accommodative."
The manufacturing index, released by the logistics
federation and the Beijing-based National Bureau of Statistics,
is based on replies to questionnaires sent to purchasing
executives at more than 730 companies in 20 industries. It
started in 2005.
The official PMI surveys mainly large and state-owned
companies, while HSBC's sample of more than 400 is weighted
more towards smaller businesses and export-related companies,
said Xing Ziqiang, an economist at China International Capital
Corp. It began in 2004.
For Related News and Information:
China economic snapshot: ESNP CH <GO>
Most-read stories on China: MNI CHINA 1W <GO>
Most-read China economy stories: TNI CHECO MOSTREAD BN
<GO>
Top economic news: TOP ECO <GO>
--Kevin Hamlin, Li Yanping. Editors: Paul Panckhurst, John
McCluskey.
To contact the Bloomberg News staff on this story:
Kevin Hamlin in Beijing on +86-10-6649-7573 or
khamlin@bloomberg.net
To contact the editor responsible for this story:
Chris Anstey at +65-6212-1130 or
canstey@bloomberg.net
2010-02-01 03:11:17.480 GMT
By Bloomberg News
Feb. 1 (Bloomberg) -- China, the world's third-biggest
economy, sustained its manufacturing expansion in January as
export orders jumped and inflation pressures grew, two surveys
showed today.
A purchasing managers' index released by HSBC Holdings Plc
and Markit Economics rose to a record. A second survey, by the
Federation of Logistics and Purchasing, recorded the second-
fastest expansion since 2008.
Stocks tumbled as the reports spurred concern that the
government will have to escalate efforts to rein in the credit
growth that has fueled the nation's infrastructure spending
surge. After raising banks' reserve requirements this month and
targeting reduced credit growth in 2010, policy makers may raise
interest rates by the end of June, according to the median
estimate in a Bloomberg News survey of economists.
"It's a solidly expansionary reading, consistent with
expectations of continued momentum in the economy," said David
Cohen, an economist with Action Economics in Singapore.
The benchmark Shanghai Composite Index of stocks fell 1.5
percent as of 10:55 a.m., extending this year's slide to 10
percent.
The HSBC index rose to a seasonally adjusted 57.4 from 56.1
in December and the survey showed input and output price indexes
rose to the highest levels since July 2008. Export sales rose at
a "near-record rate," a statement on Markit's Web site said.
Meanwhile, the government-backed Purchasing Managers' Index
fell to a seasonally adjusted 55.8 from 56.6 in December, an e-
mailed statement showed. Growth in output and orders slowed,
while export demand rose more quickly.
Snowstorms
The figures may partly reflect disruptions from cold
weather and snowstorms, JPMorgan Chase & Co. and UBS AG. said.
China is paring monetary stimulus to limit inflation and
the risk of asset bubbles in the economy that Nomura Holdings
Inc. says will contribute a third of global growth this year.
China's growth accelerated to 10.7 percent, the fastest pace
since 2007, in the fourth quarter of 2009 after a 4 trillion
yuan ($586 billion) stimulus package and record lending
helped the nation lead the world out of recession.
Today's figure in the logistics federation's survey was
less than the median 56.5 estimate in a Bloomberg News survey of
16 economists. The decline was the first in eight months. The
output index dropped for the first time since May last year,
falling to 60.5 from 61.4 in December. The export-orders index
rose to 53.2 from 52.6.
'Crucial Stage'
"China's economy is at a crucial stage of moving from
rebounding to stabilizing" with exports set to make a bigger
contribution to growth, said Zhang Liqun, a researcher at the
State Council Development and Research Center. "In the meantime,
companies may face a tougher environment with rising costs and
intensified competition."
Companies benefiting from the nation's rebound include
Chongqing Changan Automobile Co., which said Jan. 27 that 2009
profit may have climbed more than 4000 percent on higher
sales and cost controls. China Railway Construction Co. said the
same day that profit likely increased more than 50 percent from
3.6 billion yuan a year earlier because of the nation's extra
infrastructure spending.
The world's third-biggest economy may gain momentum this
quarter as exports surge 30 percent, making an interest-rate
increase more likely as inflation rises, according to China
International Capital Corp. China's 10.5 percent expansion this
year will compare with the global economy's 4.2 percent, Nomura
forecasts.
Faster Pace
The nation's growth may accelerate to 12 percent this
quarter, triggering a rate increase as early as this month as
inflation rises to 3 percent, according to Sun Mingchun, an
economist at Nomura in Hong Kong.
China is pursuing a "proactive fiscal policy" and
moderately loose monetary policy," Vice Premier Li Keqiang
reaffirmed in a speech on Jan. 28 at the World Economic Forum in
Davos, Switzerland.
Such policies will lead to "huge markets for the world and
huge opportunities" for foreign companies, he said. Li's
comments reflected a pledge in November by Premier Wen Jiabao to
speed the shift from investment- and export-led growth to an
economy "driven by consumption, investment and exports in a
coordinated way."
"We expect GDP to grow by 9 percent in 2010 and our next
revision is more likely to be upward," said Wang Tao, an
economist with UBS AG in Beijing. "We expect the government to
err on the side of keeping policy accommodative."
The manufacturing index, released by the logistics
federation and the Beijing-based National Bureau of Statistics,
is based on replies to questionnaires sent to purchasing
executives at more than 730 companies in 20 industries. It
started in 2005.
The official PMI surveys mainly large and state-owned
companies, while HSBC's sample of more than 400 is weighted
more towards smaller businesses and export-related companies,
said Xing Ziqiang, an economist at China International Capital
Corp. It began in 2004.
For Related News and Information:
China economic snapshot: ESNP CH <GO>
Most-read stories on China: MNI CHINA 1W <GO>
Most-read China economy stories: TNI CHECO MOSTREAD BN
<GO>
Top economic news: TOP ECO <GO>
--Kevin Hamlin, Li Yanping. Editors: Paul Panckhurst, John
McCluskey.
To contact the Bloomberg News staff on this story:
Kevin Hamlin in Beijing on +86-10-6649-7573 or
khamlin@bloomberg.net
To contact the editor responsible for this story:
Chris Anstey at +65-6212-1130 or
canstey@bloomberg.net
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