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China manufacturing activity slumps

30-11-2011
by 
in 

China’s manufacturing activity has slumped to its lowest level in 32 months, renewing fears the Asian powerhouse is losing steam amid a deteriorating global economic outlook.

The preliminary HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, fell sharply to 48 in November, compared with a reading of 51 the previous month, HSBC said in a statement.

This is the lowest reading since March 2009.

The fall in the PMI is likely to reignite market concerns over a worsening economic slowdown in the months ahead.

A reading above 50 indicates the sector is expanding while a reading below 50 suggests a contraction.

HSBC chief China economist Qu Hongbin expects cooling domestic demand and weakening external demand for China's exports will lead to a further slowdown in production in coming months.

But Mr Qu says China has more room to ease its tight monetary policy to boost a slowing domestic economy as inflation was now in check.

Beijing, anxious about high inflation, has pulled on a variety of levers to curb price rises in the past year, including restricting the amount of money banks can lend and hiking interest rates.

The measures appear to have worked, as the nation's inflation slowed sharply in October, with the consumer price index rising 5.5 per cent year-on-year, marking the slowest pace since May as food prices fell.

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