China Manufacturing Contracts In November

Posted December 1st, 2011 at 8:15 am (UTC-5)
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Manufacturing activity in China contracted in November for the first time in nearly three years, as countries around the world, struggling with debt and slowing growth, bought fewer Chinese exports.

The China Federation of Logistics and Purchasing says its monthly purchasing managers index (PMI) fell to 49 in October. It is the first contraction since February, 2009.

A reading above 50 indicates manufacturing is expanding, while a reading below 50 suggests a contraction.

Stephen Schwartz, chief economist for the Hong Kong-based Banco Bilbao Vizcaya, says the Chinese government has been trying to cool one of the world’s hottest economies. He told VOA this latest report suggests economic activity in China may be slowing more quickly than expected.

Schwartz says China is trying to change from a predominantly export driven economy to one fueled by domestic consumption. But he says that transition will take time.

Schwartz say China is shifting to a more expansionary stance in the short-term by loosening monetary policies, such as cuts in banks’ required reserve ratios and cuts in interest rates. He says Beijing may also consider long-term fiscal stimulus policies.

The manufacturing report came a day after China’s central bank announced plans to lower reserve requirements for the country’s lenders. It was the latest in a series of measures aimed at tackling concerns that economic slowdowns in Europe and the United States could lead to reduced growth in China.

Alistair Thornton, a Beijing-based China analyst with IHS Global Insight, says the European debt crisis is the main threat to the Chinese economy, evidenced by the global impact of the financial meltdown of 2008.

Stephen Schwartz says China’s significant role in the global economy raises some concern about the impact of a domestic slowdown.