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People's Daily Online>>China Business

November PMI signals contraction (2)

By Wang Yanlin (Shanghai Daily)

14:04, December 01, 2011

"It indicated the influence of rising production costs, which affected producers of lower stream producers more. Also, external demand worsened more than expected," the federation said.

Meanwhile, the HSBC China Manufacturing Purchasing Managers' Index, which is slanted towards private and export-oriented firms, dropped to a 32-month low of 47.7 in November, down from 51 in October. The decline was the largest in three years.

"The reading points to a sharp deterioration in business conditions across the Chinese manufacturing sector," said Qu Hongbin, chief economist for China at HSBC. "Combined with a faster-than-expected easing in inflation, this implies that growth is set to overtake inflation as China's top policy concern."

Last night, the central bank announced its first cut in banks' required reserve ratio in three years, unlocking about 370 billion yuan (US$58 billion) of liquidity in the banking system. It was treated as a signal of broader policy fine-tuning to sustain China's economic growth, which slowed down to 9.1 percent in the third quarter.

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