China's Industrial Sector Continues To Grow For The Seventh Month In A Row

Daily Forex Fundamentals | Written by ecPulse.com | Oct 01 09 07:21 GMT |

The industrial sector in China continues to grow and expand for the seventh consecutive month, reaching in September to its highest in 17 months, confirming that the Chinese economy was able to get rid of the negative effects of the worst global crisis since the Great Depression. The manufacturing purchasing managers' index for the month of September rose to 54.3 higher than the previous reading of 54.0 but less than the expected 55.0. It is worth mentioning that any reading higher than 50 indicate growth and prosperity in the industrial sector in China and the vice versa. The outlook for China's industrial sector remains positive, as rising loans and investment operations as well as increased foreign exchange inflows into the country serve to increase demand in the industrial sector, and compensate the sharp decline in exports due to the weak global demand. After the European Union, the United States, Britain and Japan fell into recession, demand on China's exports was seriously damaged, as these countries are major markets for the Chinese products. But the Chinese government was quick to take one of the important steps that helped the rapid recovery of the Chinese economy, throughout the adoption of a massive stimulus plan, that compensated for the fall in exports. The stimulus plan totaled 4 trillion yuan (586 billion dollars), directed towards infrastructure projects in order to create new jobs and support households spending that should lead to a social stability in the largest country in terms of population. In addition to this, the government focused on supporting another important sector, the housing sector, by facilitating borrowing after the global financial system was hit hard by the credit crisis, as well as lowering interest rates and impose many facilities which led house prices to rise. The government also worked on supporting the household sector encouraging families to increase their spending, in order to be able to record an annual growth rate of 8.00%, were so far it managed to reach to 7.9% during the second quarter, while expectations indicate it to grow by 9.0% during the third quarter. Throughout the details of the manufacturing purchasing managers' index we find that the industrial output index rose to 58.0 during the month of September from 57.9 in August, while new orders rose to 56.8 compared with the previous reading of 56.3, as for orders on exports it rose to 53.3 from 52.1. The employment index has witnessed increased to 53.2, its highest level since April 2008, from the previous reading of 51.4 Despite the positive outlook of the Chinese economy, there are some fears that the cash pumped into the financial markets will create a sharp rise in asset prices and stock prices, which already do not reflect the real conditions within companies and investment. Others fear that as soon as the stimulus plans effects will start fading, the economy might start retreating again, yet the relief comes from hopes that until then, global demand might be starting to improve to levels able to support the economic growth in China. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk