China's manufacturing industry shrinks

According to reports, CLSA's China Purchasing Managers Index (PMI) showed on March 2 that China's manufacturing industry contracted for the seventh consecutive month in February, but the degree of shrinkage has eased from the previous months. The PMI rose to 45.1 in February and has risen for three consecutive months since it fell to a record low of 40.9 in November last year, compared with 42.2 in January.

The latest PMI and other economic data show that the Chinese economy is beginning to stabilize. In the fourth quarter of last year, China’s economic growth rate hit a new low in seven years. But economists say it is too early to say that the economic rebound is now. While the initial signs of economic stabilization are encouraging, the sustainability of this trend remains to be seen.

The government will release the first batch of comprehensive monthly economic data this month, which will outline a clearer picture of the economic situation. The government has not released data on investment and industrial output in January, but will release data on investment and industrial output for January-February later this month.

China's January economic data was distorted by the impact of the Spring Festival holiday. Except for the sharp increase in loans, other data performed poorly. Imports and exports fell sharply, commodity prices fell, and consumer price increases fell sharply.

Eric Fishwick, head of economic research at CLSA, said manufacturing activity is still shrinking, but the degree of contraction has eased from the end of 2008; although credit data in January rebounded, orders for domestic manufacturing were The impact is small, as the rise in the new order index is largely driven by export orders.

The new export orders index rose to 39.5 in February, compared with 36.3 in January, and the lowest in history in November last year was 28.2. The new orders index rose to 44.2 in February from 39.9 in January, compared with a historical low of 36.1 in November last year.

The employment index rose to 46.6 in February from a record low of 45.0 in January, breaking the nine-month decline.

Andy Rothman, China's macro strategist at CLSA, said one of the key impacts of the growth in new export orders in February was that, at least for now, layoffs have peaked. Although the unemployment rate will continue to rise, the largest wave of layoffs has passed.

The speech of Premier Wen Jiabao of the State Council of China also confirmed the above optimistic views. Wen Jiabao said that although the impact of the global financial crisis is still spreading, the economic stimulus measures adopted by the Chinese government have already played a role. He also pointed out that the Chinese government is ready to take more firm and effective measures. Xinhua News Agency quoted China’s Vice Minister of Commerce Lushan as saying that China will continue to increase the export tax rebate rate for some commodities according to the economic situation and help enterprises reduce the burden.

The CLSA China Purchasing Managers Index is usually released on the first business day of each month. The index was compiled by the British research firm Markit Group Ltd.

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