Survey shows China's manufacturing improving

BEIJING (AP) ? China's manufacturing improved this month, adding to signs an economic recovery might be taking shape after a sharp slump in the world's No. 2 economy.

A preliminary version of HSBC's monthly purchasing managers' index rose to a three-month high of 49.1 points on a 100-point scale, the bank said Wednesday. That still was below the 50-point level that indicates a contraction but was a strong improvement from September's 47.9.

That added to data last week that showed retail sales and investment picking up. Economic growth in the three months ending in September fell to a three and a half year low of 7.4 percent but the decline was much gentler than in earlier quarters. Activity grew by 2.2 percent over the previous quarter, the biggest such gain in a year.

HSBC Corp. said the preliminary reading is based on responses from 85 to 90 percent of the 420 companies it surveys each month. The final index is due out Nov. 1.

"October's flash PMI reading continues to recover for the second month, thanks in part to a gradual improvement in the new orders index, which picked up to a six-month high," said HSBC economist Hongbin Qu in a statement.

But Qu warned that challenges "still abound" and the job market faces pressure.

"This calls for a continuation of policy easing in the coming months to secure a firmer growth recovery," he said.

The Chinese numbers are rare good news for the world economy, which has slowed as Europe's chronic debt crisis worsened and the American economy stagnated.

Analysts have cautioned that a Chinese recovery is likely to be "L-shaped," meaning the decline might have stopped but improvements in growth should be gradual. That would be a setback for exporters of commodities and other goods that are counting on China to help drive a rebound in global demand.

The slowdown was due largely to government curbs imposed to cool an overheated economy and reduce reliance on exports by encouraging more domestic consumption. The slump worsened last year after global demand for Chinese goods plunged unexpectedly.

Chinese leaders have cut interest rates twice since early June and are pumping money into the economy through high spending by state companies and on building airports and other public works but have avoided a large stimulus.

Data last week showed retail sales rose 14.4 percent in September, accelerating from the first half's 14.1 percent growth. Investment in factories and other fixed assets improved, rising 20.5 percent in the first nine months of the year, up from a 20.2 percent rate for the first eight months.

China's expansion is strong compared with the United States and Japan, where this year's growth is forecast in low single digits, but the slowdown has been painful for companies that depend on strong demand for new factories and other goods.

The slump raised the risk of job losses and unrest, posing a challenge to the ruling party as it prepares for a once-a-decade handover of power to younger leaders.

Premier Wen Jiabao, the country's top economic official, said last week growth appeared to be stabilizing and expressed confidence China can meet its official targets for the year. Wen gave no growth forecast or a possible time frame.

The ruling Communist Party's official growth target this year is 7.5 percent, well below the double-digit levels of recent years.

Growth could rebound to about 8 percent in the current quarter, said Credit Agricole CIB economist Dariusz Kowalczyk in a report.

"It is increasingly clear that no further measures to stimulate growth are needed," said Kowalczyk. "Markets may be disappointed to realize that Chinese recovery will be gradual and no new stimulus is forthcoming."

Source: http://news.yahoo.com/survey-shows-chinas-manufacturing-improving-024404842--finance.html

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