Slow growth for China as factory sector edges up in September

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A’S manufacturing industry saw a narrow expansion in September, roughly equal to August’s growth, according to purchasing managers’ index (PMI) figures released by HSBC yesterday.

The figure has been revised down from 51.2, which was HSBC’s first estimate, but still sits marginally above 50, which indicates some meagre growth in the sector.

The measure indicates that manufacturing grew very slightly in both August and September, bouncing back from a contraction between May and July.

According to purchasing managers, more firms saw new export orders rising than falling for the first time in six months, and backlogs of work increased for the second month in a row.

Manufacturers drew attention to rising demand in Europe and the US, correlating with the Eurozone’s exit from recession in the second quarter of the year.

China’s official manufacturing and services PMIs are both released by the government tomorrow.

The country also opened the Shanghai free trade area over the weekend, with 25 companies approved to conduct operations in the zone. There are also 11 financial institutions already setting up in the area, including parts of DBS bank and Citibank.

Diana Choyleva, head of macroeconomic research at Lombard Street, commented: “China is in dire need of reform and the Shanghai free trade zone will be the testing ground for opening up the financial sector to market forces in the rest of the economy.”

She added: “Beijing doesn’t have years to indulge in this experiment as the economy has been severely debilitated by the global financial crisis and the authorities’ misguided policy response.”