By Bloomberg News - May 1, 2012 8:16 AM GMT+0700
China’s manufacturing expanded for a fifth month in April, reducing the case for policy makers to open the taps on credit in the world’s second-largest economy.
The Purchasing Managers’ Index rose to 53.3 from 53.1 in March, China’s statistics bureau and logistics federation said in a statement today. That’s the highest reading in a year and compares with the 53.6 median forecast in a Bloomberg News survey of 27 economists. A figure above 50 indicates expansion.
Today’s data signal China may be strengthening from the slowest pace of growth in almost three years, reached last quarter. At issue for Premier Wen Jiabao is whether to extend a two-month pause in lowering banks’ required reserve ratios, as he seeks to rein in property and consumer prices without sending the economy into a so-called hard landing.
“Policy easing has already been under way and growth is picking up,” Wang Tao, a Hong Kong-based economist with UBS AG, said before the release. “Further policy relaxation is not necessary as implementation of the current policy targets should be sufficient to help growth rebound this quarter.”
A separate PMI compiled by HSBC Holdings Plc and Markit Economics showed last week that manufacturing may have contracted for a sixth month in April, according to preliminary results. The final reading of the survey, which has a different sample and methodology, is due tomorrow.
Property Crackdown
The federation’s manufacturing index is based on responses from managers at more than 820 companies in 28 industries, while HSBC’s covers more than 420 companies.
China’s gross domestic product expanded 8.1 percent in the first three months of 2012 from a year earlier in the fifth straight quarterly deceleration as authorities cracked down on property speculation and exports were hurt by Europe’s debt crisis.
The pace will slow to 7.5 percent to 8.5 percent this year and next, as a euro-area recession curbs exports, Moody’s Investors Service said in a report on April 26.
The fundamentals of the economy remain sound with growth “within a reasonable range,” the State Council said after a meeting chaired by Wen on April 13. The government also said domestic expansion faces “downward pressures” and that leaders would “maintain an appropriate level of investment.”
Wen has said the government will preemptively adjust and fine-tune policy in a “timely and appropriate” manner. China has lowered banks’ required-reserve ratio twice since November to boost liquidity and spur loan growth.
Economic Improvement
At the same time, authorities have refrained from cutting interest rates amid inflation concerns, and have paused since mid-February in lowering banks’ reserve requirements. Policy makers cut the reserve ratio for lenders twice since late November.
Signs of economic improvement include an acceleration in industrial output and surge in new lending in March. Production growth in the second quarter will be “slightly higher” than in the first three months of 2012, Zhu Hongren, a Ministry of Industry and Information Technology spokesman, said April 25.
Profits at industrial companies rose in March from a year earlier, rebounding from the first January-February decline since 2009, a statistics bureau report showed on April 27.
Beijing Automotive Group Co. Chairman Xu Heyi said April 23 that he sees “clear signs of recovery” in vehicle demand, which will keep advancing during the rest of the year. The first quarter will probably be the year’s lowest point, said Xu, leader of the state-owned automaker.
--Zheng Lifei. With assistance from Ailing Tan in Singpoare, Chua Baizhen, Penny Peng and Regina Tan in Beijing. Editors: Scott Lanman, Nerys Avery
To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net
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