China’s manufacturing activity slumped to its lowest level in 32 months in November, HSBC said yesterday, renewing fears the Asian powerhouse is losing steam amid global economic woes.
The news comes just days after Vice Premier Wang Qishan, China’s top finance official, gave a dire warning that the global recession was here to stay and would impact the export-dependent economy due to weakening external demand.
The preliminary HSBC purchasing managers’ index dropped to 48 in November – the lowest since March 2009 – compared with 51 in the previous month, HSBC said in a statement.
A reading above 50 indicates the sector is expanding while a reading below 50 suggests a contraction. The final figure will be released on December 1.
HSBC chief China economist Qu Hongbin said he expected cooling domestic demand and weakening external demand for China’s exports heralded a further slowdown in production in coming months.
But he added China had more room to ease its tight monetary policy to boost a slowing domestic economy, as inflation was now in check.
Beijing, anxious about high inflation, has pulled on a variety of levers to curb price rises in the past year, including restricting the amount of money banks can lend and hiking interest rates.
The measures appear to have worked, as the nation’s inflation slowed sharply in October, with the consumer price index rising 5.5 per cent year-on-year, the slowest pace since May as food prices fell.
“It will leave more room for Beijing to step up selective easing measures, which should gradually filter through to keep China on track for a soft landing,” Qu said in the statement.
China’s economic growth eased to 9.1 per cent in the third quarter from 9.5 per cent in the second quarter, as government efforts to tame inflation and economic turbulence in Europe and the United States curbed activity.
Wang warned at the weekend that China needed to fix “structural problems” in its financial system to cope with a “long-term” global downturn that threatens the world’s second largest economy.