China’s manufacturing activity suffers due to the slowdown of global economy

Thursday, December 1st, 2011 5:55:34 by

China’s manufacturing activity suffers due to the slowdown of global economy

This is happening for the first time in last 33 months that China’s manufacturing activity has contracted to the lowest level. The official reports compiled in the month of November showed that the slowdown in the global economy
has had great impact on China’s key export sector. The deepening economic situation in world caused China’s manufacturing activity to fall to 32-month low. Moreover the official Purchasing Managers Index (PMI) fell to 49.0, which is the lowest level since
March 2009.

The Purchasing Managers Index is the fundamental indicator of industrial activity and a reading below 50 shows a definite contraction. In past few years, China’s economic growth experienced a great boost with the help of higher manufacturing rates. Nonetheless,
the current economic problems have raised concerns about the pace of manufacturing growth. The questions are popping up whether China will be able to keep two of its biggest export markets, the US and the European market.

The HSBC said its manufacturing activity index also fell to a 32-month low of 47.7 in November from 51 in October, slightly worse than preliminary data released last week and signalling a "solid deterioration" in the sector.

Some of the analysts had already predicted such a move after the central bank said recently it would "fine-tune" monetary policy amid growing concerns that the weak global economy is escalating the risk of a sharp slowdown in China.

IHS Global Insight analyst Alistair Thornton said the "shocking" data showed the world’s second largest economy was "sagging under the weight of this year’s credit tightening. The message is clear: the economy is slowing much faster than expected and the
government has stepped into the ring. The loosening campaign has begun. We expect this to feed through into slower industrial production growth numbers for November, and slower gross domestic product numbers for the fourth quarter."

A researcher with the Development Research Centre of the State Council, Zhang Liqun, expressed his views in this regard. He stated: "The November PMI dropped further to below the boom-bust line of 50… indicates that the economic growth pace would continue
to moderate in the future.”

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