Monday, September 6, 2010

China's manufacturing grows

SHANGHAI - Chinese manufacturing growth improved and auto sales rebounded in August, suggesting the world's second-biggest economy may not be slowing as quickly as feared.

Two surveys released Wednesday showed production, new orders and purchasing prices all rose in August, with the HSBC purchasing managers index - a seasonally adjusted index designed to measure the performance of the manufacturing economy - rising to its highest level in three months, at 51.9.

"This reconfirmed our long-held view that China is moderating rather than melting down," Hongbin Qu, chief economist for China at HSBC, said in the report.

The state-affiliated China Federation of Logistics and Purchasing said its PMI rose to 51.7 in August from 51.2 in July. Numbers above 50 show manufacturing activity expanding, and the federation's PMI readings have remained above 50 for 18 straight months after slowing in late 2008 and early 2009.

China's economic growth slowed to 10.3 percent over a year earlier in the second quarter, down from its blistering 11.9 percent first-quarter pace. Many worry that the slowdown could weaken the global recovery if it cuts Chinese demand for imported iron ore, industrial machinery and other foreign goods.

But strong export demand, domestic consumption and investment are still supporting steady growth, federation analyst Zhang Liqun said. "The rise in the PMI for August shows that China's economy will not suffer a serious correction," Zhang said.

Signs that Chinese growth will continue at an elevated level may add to pressure from the U.S. and other major trading partners for Beijing to let the yuan rise at a faster rate.

Some U.S. business groups say the yuan is undervalued by up to 40 percent and American lawmakers have called for punitive action against what they say are Chinese imports kept artificially cheap by exchange-rate controls.

In June, China loosened the controls that had kept its currency trading at about 6.83 yuan per U.S. dollar since late 2008 to help Chinese exporters compete amid weak global demand. Late Wednesday, the yuan was trading at 6.8112 to the dollar.

by Elaine Kurtenbach Associated Press Sept. 2, 2010 12:00 AM

China's manufacturing grows

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