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Monday 10th of January 2011
August 2, 2010    

Chinese manufacturing sees further slowdown in July

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by Kay Murchie

There is further evidence today that China’s economy is cooling after two official independent surveys revealed a slowdown in manufacturing activity.

Firstly, the HSBC China Manufacturing purchasing managers index (PMI), fell to 49.4 in July from 50.4 in June.

As a result, manufacturing contracted for the first time in 16 months as any reading below the crucial 50 mark means the sector is in decline.

HSBC chief China economist Qu Hongbin comments: “This suggests that manufacturing production growth continued to decelerate last month, reflecting the combined effect of credit tightening, property cooling measures and Beijing’s measures to cut capacity in energy-intensive sectors.”

However, a separate survey released by the China Federation of Logistics and Purchasing showed manufacturing activity eased to 51.2 in July from 52.1 in June.

This survey suggests manufacturing activity is slowing but remains just above the crucial 50 level.

According to economists with Nomura International, the heavy rains and floods that hit China last month was the primary reason for the slowdown in manufacturing activity.

“Taking into account the downpours and floods plaguing many areas across the country, we believe the actual PMI reading should be better than what the figures indicated,” they said in a research note.

The figures come just a few days after Yi Gang, China’s chief currency regulator, said China has surpassed Japan and become the world’s number two economy and could pinch the top spot from the US in the next 15 years.

The Chinese economy grew by a staggering 11.9% in the first quarter and 10.3% in the March to June period, according to the National Bureau of Statistics (NBS).

China has already achieved a major milestone this year by overtaking Germany as the world’s biggest exporter. Germany had held the top spot since 2003.

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