- China Manufacturing Unexpectedly Contracts as Orders Drop!
by Bloomberg New
China’s manufacturing unexpectedly shrank for the first time in nine months as new orders contracted and output rose at a slower pace, signaling the slowdown in the world’s second-biggest economy is deepening.
The Purchasing Managers Index fell to 49.2 in August from 50.1 in July, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. Australia & New Zealand Banking Group Ltd. cut its estimate for China’s full-year growth after the report.
The data increase pressure on Premier Wen Jiabao to reverse the slowdown ahead of the transfer of power to a new Communist Party leadership that begins later this year. Record unemployment in the euro area and a jobless rate stuck at more than 8 percent in the U.S. may crimp an export rebound while slumping corporate earnings, bad debts at banks and property curbs are restraining investment in China.
“The government won’t want to hand over an economy in a hard landing to the next administration, so authorities are likely to become bolder with policy easing, said Liu Li-Gang, chief China economist at ANZ in Hong Kong. “They could continue to use tax relief and faster approval of infrastructure investment to instill confidence, but the most effective policy tool in the short term is to aggressively ease the reserve-requirement ratio.”