China's economy ends year on high note
China's economy has ended the year on a strong note with two indices showing continued expansion of the country's manufacturing sector.
January 01, 2013 / 20:04 IST
China's economy has ended the year on a strong note with two indices showing continued expansion of the country's manufacturing sector.
The official purchasing managers' index, published on Tuesday, showed that the pace of expansion last month held steady from November.November's 50.6 reading had marked a seven-month high. Readings above 50 per cent signal expansion.More News From Financial Times
China's economy ends year on high note Euro ends week on a positive note Japanese bond futures hit record high All the world's a gallery Rabobank ends cycling sponsorship The latest numbers follow a surge to a 19-month high of the HSBC purchasing managers' index. The HSBC index for December climbed to 51.5 from 50.5 a month earlier, according to figures published on Monday.In rising further above the midpoint of 50, the reading signalled an accelerated pace of expansion.Although China is still set for sub-8 per cent growth in 2012, its weakest in more than a decade, momentum picked up noticeably in the fourth quarter after the government increased its spending on infrastructure. "Such momentum is likely to be sustained in the coming months when infrastructure construction runs [at] full speed and property market conditions stabilise," said Qu Hongbin, HSBC's chief economist for China.Mr Qu forecast that economic growth could rebound to 8.6 per cent next year, which would mark a relatively strong recovery despite a sluggish global economy.The impasse in fiscal negotiations in the US and lingering debt trouble in Europe could cast a pall over China's prospects next year. Yet the latest PMI shows that for the time being, China has been able to rely on domestic demand to compensate for external weakness.The new-orders sub-index in the PMI rose to a 23-month high of 52.9, up from 50.8 in November. At the same time, the new export orders sub-index fell to 49.2 in December from 52.1. The gap between the two was seen as an indication that domestic, not foreign, demand had driven the improvement.The Shanghai Composite, China's benchmark index, rose nearly 1 per cent in trading on Monday morning, continuing an upswing that has seen it rally nearly 15 per cent over the past month after languishing for much of the year. Hong Kong's Hang Seng index inched down 0.2 per cent.Chinese economic data began to point upward in September after the government ramped up spending on infrastructure projects and presided over a cautious loosening of monetary policy.Nevertheless, there are questions about whether the rebound could soon run out of steam. Inflation, subdued for nearly two years, has started to edge higher, which could prompt an eventual tightening of monetary policy. Worries are also mounting about a boom in lightly regulated non-bank financing. "We are concerned about the sustainability of the recovery in [the second half of 2013] as the central bank recently signalled concerns over shadow banking activities and may tighten regulations to control financial risks," said Zhang Zhiwei, an economist with Nomura. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
