China's economy stabilizing; export orders tick up

MONDAY, JUNE 1, 2009
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By Xian Wan and Biodun Iginla, BBC News

BEIJING - China's manufacturing sector continued to expand moderately in May as new export orders improved, two surveys showed on Monday, adding to tentative signs that the world's third-largest economy is stabilizing. "Weak external demand is still hurting China's manufacturers, but conditions are gradually improving in response to stimulus spending... China remains on track for a moderate recovery after the sharp slowdown seen late last year," said Brian Jackson, an analyst with Royal Bank of Canada in Hong Kong. The official purchasing managers' index (PMI) fell slightly to 53.1 from 53.5 in April, its third straight month above the mark of 50 that separates expansion from contraction.

A separate PMI published by Hong Kong-based brokerage CLSA rose to a 10-month high of 51.2 from 50.1 in April, its second month above 50. Asian stocks and the Australian dollar shot to eight-month highs after the release of the data, fueling optimism that the worst of the global downturn may be over. Both surveys showed a slight improvement in new export orders. The new export orders sub-index in the official PMI breached 50 for the first time since June 2008, rising to 50.1, while the equivalent index in the CLSA PMI reached 49.2, the sixth straight month of improvement.

The official survey, conducted by the China Federation of Logistics and Purchasing (CFLP), canvasses a bigger sample of mainly state-owned firms, while the CLSA survey covers more smaller, privately owned firms, although it is regarded as a better leading indicator particularly for the export sector. (For a graphic, click on: here) The surveys also showed that the Chinese manufacturing sector is faring much better than in the West, where a number of similar indicators due later on Monday are expected to show further deep contractions in Western economies which are major consumers of Asian goods. Russia's manufacturing sector contracted at its slowest pace in seven months in May, a further sign that the worst of the slowdown may have passed for major emerging economies.

South Korea's daily export value in May rose for the fourth straight month, a further sign of improvement in the global economy, though economists said it did not mean a lasting recovery had arrived. Chinese and Hong Kong stocks rose in tandem on the better-than-expected PMI data. The Hang Seng Index .HSI was up 2.8 percent, its highest level since September 2008, while the Shanghai Composite Index.SSEC was up 3.2 percent in mid-afternoon trade. NOT GETTING WORSE "The Chinese economy is recovering, and the May PMIs have further proven that this argument is correct," said Feng Yuming, an analyst with Orient Securities in Shanghai. But Feng said the export sector remained weak despite the slight improvement in the export orders sub-indexes.

Continued... View article on single page Previous Page 1 | 2 Next Page SHARE: Del.icio.us Digg Mixx Yahoo! Facebook LinkedIn POSTED BY BIODUNIGINLA AT 8:11 AM LABELS: BBC NEWS. CHINA'S ECONOMY, BBC NEWS. XIAN WAN BIODUN IGINLA