News & Reports News Year 2012 January ,2012 State-owned factories in return to expansion

State-owned factories in return to expansion

MANUFACTURING activities in China's large state-owned factories returned to expansion in December but analysts say more easing policies are needed.The official Purchasing Managers' Index, a gauge of manufacturing activities weighted towards large state-owned companies, returned to 50.3 last month from November's 49, the China Federation of Logistics and Purchasing said yesterday.
A reading above 50 is expansion.In comparison, the HSBC China Manufacturing Purchasing Managers' Index, slanted more towards private and export-oriented companies, remained below 50 in December, at 48.7, although that was an improvement on November's 47.7.
"The activities were boosted by demand prior to the New Year and the Spring Festival holidays in China," said Zhang Liqun, an analyst appointed by the federation. "It indicated stabilizing businesses, albeit still weak, and less risks of a hard landing in China's economy."However, with external conditions continuing to deteriorate, Zhang said China should be prepared to allow more policy easing to cope with a potential economic slowdown.On Saturday, the central bank said it would closely follow economic movement both at home and abroad, and fine-tune monetary policies accordingly.

China has relaxed monetary policies a little. The central bank allowed banks to set aside less capital as reserves last month, and it ordered lenders to give more financial support to small and medium-sized companies.

The Central Economic Work Conference, held last month to set the tone for this year's economic policies, said China would continue a prudent monetary policy stance, but keep policies flexible, targeted and forward-looking.

Component indices under the official PMI showed that new orders rebounded to 49.8 last month, up from November's 47.8. Production increased to 53.4, 2.5 points higher than a month earlier.The sub-index for purchase prices rose 2.7 percentage points from November to 47.1 percent in December.The sub-index for export orders recovered 3 percentage points to 48.6 percent in December from November's sharp drop to 45.6 percent, suggesting that the impact of the spreading eurozone debt crisis eased, and the weakened demand gradually regained the former losses.Twelve industries, including petroleum refining and coking, clothing, shoes, fur and feather products manufacturing, agricultural food processing and food production, enjoyed a PMI over 50, Xinhua news agency reported, while sectors such as facility, general equipment and industrial chemicals manufacturing registered under the 50 mark.

Last Updated (Tuesday, 03 January 2012 12:31)