Global turmoil hits Chinese manufacturing

27-09-2011

Manufacturing in China shrank for the third straight month in September as turbulence in the US and Europe hurt demand for exports.

The manufacturing index released by HSBC Holdings and Markit Economics showed a reading of 49.4 for the month compared with 49.9 for August and 49.3 for July.

The data adds to evidence that the world's second-biggest economy is slowing after China's central bank raised borrowing costs and curbed lending to cool inflation.

China has also announced plans to levy a tax on resource producers based on the value and volume of their output.

Beijing has joined policy-makers in other Asian economies, including South Korea and Malaysia, in limiting monetary tightening as a deepening debt crisis in Europe and the risk of renewed recession in the US threaten to stall a global recovery.

"The index points to continued moderation in manufacturing growth," said Chang Jian, an economist at Barclays Capital in Hong Kong who previously worked for the World Bank. "But the fact that the number is hovering around 50 should reduce concerns over a sharp slowdown and which would support the authorities in keeping their current policy stance largely in place."

The gauge has slumped 12 per cent this year as the government has tightened policies to cool inflation and concern has deepened that faltering growth in developed economies will sap export demand. HSBC's preliminary index, known as the Flash PMI, is based on 85-90 per cent of responses to a survey of executives in more than 400 companies.

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