Friday October 18, 2019

CHINESE MANUFACTURING SECTOR SHOWS FIRST SLOWDOWN IN NEARLY 3 YEARS

December 2, 2011

November marked China’s first slowdown in manufacturing since February 2009, according to a monthly report from the China Federation of Logistics and Purchasing. The organization’s purchasing managers’ index (PMI) showed a drop to 49 points in November from October’s 51 points. A reading above 50 indicates manufacturing is expanding, while a reading below 50 suggests a contraction.

This contraction in China’s crucial manufacturing sector, which is claimed to support 40% of GDP, is considered a result of China’s property market cooldown and a decrease in export demand from struggling economies worldwide. In Britain and the Eurozone, manufacturing has also decreased drastically as the region nears recession. Chinese leaders have expressed worry over the European debt crisis’ effect on the Chinese economy, claiming the current issues may become more serious than 2008’s financial meltdown.

“The current crisis is grimmer and more challenging than the global financial crisis triggered by the Lehman Brothers bankruptcy in 2008,” claimed China’s Vice Finance Minister, Zhu Guangyao, in a forum in Beijing on Thursday. China and other foreign countries were able to keep the global economy afloat in 2008 with their booming growth rates. Now these countries are wary of creating additional stimulus measures, and the prospects of a contraction of the world economy have Chinese leaders worried this could negatively impact China’s economic development.

The Chinese government is taking measures to address concerns about reduced growth, including cutting required reserve ratios and interest rates at China’s central bank. A loosening of monetary policy could encourage lending and support China’s domestic economy as the export industry slows down. However, these new policies remain short-term solutions. A more open lending environment could lead to a rise in consumer prices and inflation. Additionally, signs of an overall slowdown in domestic purchasing raise concerns about depending on Chinese consumers.

Despite signs of slow production in Asia and Europe in November, manufacturing in the U.S. may have grown at the fastest pace in five months, showing factories will continue supporting the economic expansion through the end of 2011. Nevertheless, fears of the Euro debt crisis escalating and a possible dismantling of the single-currency zone leave the U.S., China, and other global powers discussing the necessity of added global stimulus measures in coming months.

 

For further information on China’s manufacturing slowdown, please see the following news sources and commentary:

 

Voice of America“China Manufacturing Contracts in November”

New York Times“Chinese Manufacturing Contracted in November”

Huffington Post“China’s Economy is Contracting in the Industrial Sector”

BBC News“Are China’s Leaders Worried?”


For Chinese commentary on China’s manufacturing slowdown, please see the following news sources:

 

Sina 新浪财经 – 11月中国PMI为49% 32个月来首回50%以内

Xinhua 新华 “11月份中国制造业PMI为49.0% 环比降1.4%”


Compiled and edited by Betsy Gass.