Home Forex Market News China Manufacturing Gauge Drops as Risks to Growth Target Mount

China Manufacturing Gauge Drops as Risks to Growth Target Mount

China Manufacturing

An employee monitors machinery used to adhere components to smartphone circuit boards in a manufacturing facility at ZTE Corp.’s headquarters in Shenzhen, China. A pullback in manufacturing adds pressure on the government to boost stimulus. Photographer: Brent Lewin/Bloomberg

A gauge of China’s manufacturing fell, suggesting the central government will have to step up stimulus to meet its expansion target of 7.5 percent this year.

The Purchasing Managers’ Index was at 51.1 for August, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing, missing the median 51.2 estimate in a Bloomberg News survey and compared with 51.7 in July. Readings above 50 indicate expansion.

The report follows a fall in the preliminary reading of a private manufacturing gauge for August and weaker-than-expected credit, production and investment data for July, suggesting the economy is losing momentum. A pullback in manufacturing, coming as the property market slumps, adds pressure on the government to boost stimulus.

“Downward pressure on the economy is evident since July,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. “The recovery in the second quarter can be attributed to stimulus measures such as railway investment and social housing construction, so that is not steady.”

Estimates for today’s official PMI from 31 analysts ranged from 50.3 to 51.7. The report is based on responses to surveys sent to purchasing executives at 3,000 companies.

The MSCI Asia Pacific Index was little changed.

The final reading of a separate manufacturing gauge issued by HSBC Holdings Plc and Markit Economics is scheduled to be released at 9:45 a.m. The preliminary figure published on Aug. 21 was 50.3, down from a final July number of 51.7.

New credit plunged in July after a June surge, suggesting People’s Bank of China Governor Zhou Xiaochuan will need to loosen policy to sustain growth if lending continues to dry up.

The central bank recently granted a 20 billion yuan re-lending quota to some regional bank branches to support agriculture, according to a statement on its website last week. The PBOC will also cut interest rates on re-lending to some rural financial institutions meeting certain criteria in poor areas by 100 basis points.

To contact Bloomberg News staff for this story: Xiaoqing Pi in Beijing at [email protected]

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