China's factory output rises

City A.M. Reporter
Chinese factories raised production modestly in March while cost inflation slowed, early signs that it has had some success in taming prices through monetary policy tightening.

Two surveys of China's vast manufacturing sector showed factories growing moderately rather than booming, and some economists said a further slowdown could be in store.

Yet few thought slackening production would slam the brakes on the world's fastest-growing major economy, even if it was starting to feel some trade damage from Japan's earthquake and nuclear disasters.

"It's growing at a slow and steady speed as tighter monetary policy impacts," said Stephen Green, an economist at Standard Chartered in Shanghai.

"I'm not overly worried about growth. We need to hit inflation. That is the priority still," he said.

China's official purchasing managers' index (PMI), compiled by the government, rose to 53.4 in March from a six-month low of 52.2, slightly under a Reuters forecast for 54.

A separate survey published by HSBC showed the PMI steadying near seven-month lows at 51.8, from February's 51.7.

Although both surveys made no mention of Chinese factories hurting from disrupted supplies from Japan, but in its analysis of the official survey China's statistics bureau said Japan's crisis was starting to take a toll on production.

It said the electronics industry was feeling the squeeze of reduced supplies of parts and raw materials.

High oil prices and excess cash in the Chinese economy drove China's inflation to a 28-month high of 5.1 per cent in November but the surveys offered signs that price pressures were easing.

The input prices sub-index, a measure of how much factories pay for raw materials and other intermediary goods, eased to 68.3 in March for the official PMI, from February's 70.1, showing costs kept rising, but at a slower pace.