Pace of growth in China slows further

City A.M. Reporter
CHINA’S vast manufacturing sector cooled further last month in response to the gradual withdrawal of monetary and fiscal stimuli and a drive by the government to rein in real estate speculation.

The purchasing managers’ index (PMI) fell to 51.2 in July from 52.1 in June and 53.9 in May, the China Federation of Logistics and Purchasing (CFLP) said yesterday.

“The Chinese economy is slowing down due mainly to the ongoing property tightening measures, but the slowdown is clearly not as dire as some expected,” said Ting Lu, an economist with Bank of America Merrill Lynch.

The PMI is designed to provide a timely snapshot of business conditions across a wide range of industries. A figure above 50 indicates expansion; a number below 50 points to contraction. Although the index has now fallen for three months in a row, it has been above the boom-bust mark of 50 since February 2009.

Government economist Zhang Liqun said he expected the economy would continue to level off but full-year growth would still be around 9.5 per cent.

The government has sharply reduced the growth rate of credit and broad money in recent months after a record surge in lending last year by state-controlled banks to supplement Beijing’s 4 trillion yuan (£375.3bn) anti-crisis fiscal stimulus package. Key to steering policy back to normal is a cut in this year’s bank lending quota to 7.6 trillion yuan from 9.5 trillion, or nearly 30 per cent of annual output, in 2009.