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China's economy may slow in fourth quarter

(People's Daily Overseas Edition)

16:35, November 03, 2011

Edited and translated by People's Daily Online

Beijing, Nov.3 (People's Daily Online) -- China's Purchasing Managers' Index (PMI) dropped to 50.4 percent in October, down 0.8 percentage points from September, the China Federation of Logistics and Purchasing said on Nov. 1. After rising for two consecutive months, the country's PMI experienced a slight drop, but remains above 50 percent.

Industry insiders said that the decline indicates China's economic growth may continue to slow in the fourth quarter, but the country's economy will not lose steady growth momentum and is expected to grow over 9 percent this year.

Slowdown in demand requires attention

While the overall PMI only made a slight dip, there were some major shifts within the sub-indexes.

Of the 11 PMI sub-indexes, two sub-indexes — finished products and suppliers' delivery time — rose in October from the previous month, while the other nine fell to varying degrees. Four sub-indexes — new export orders, backlog orders, imports and purchasing prices — witnessed a major reduction of more than 2 percentage points from September. The purchasing price sub-index dropped to 46.2 percent in October, down 10.4 percentage points from the previous month.

Zhang Liqun, a senior research fellow at the macroeconomic research department of the Development Research Center under the State Council, said, "Despite a fall in PMI in October, the index has generally remained stable, marking a steady drop in the economic growth in the future. The overall economic growth showed a downward trend in the third quarter because of a drop in exports and investment growth rates and the increasingly serious shortage of funding facing enterprises. China's economic growth is expected to continue to gradually slow in the future because of demand factors."

Unnecessary to be overly worried about PMI data

Cai Jin, deputy director of the China Federation of Logistics and Purchasing, said that despite a month-on-month drop in PMI in October, the data is not pessimistic but rather has shown some optimistic signs.

"PMI of 50.4 percent is still rather good, and China remains one of the fastest-growing countries in the world. It is noteworthy that China's stable economic growth has played a significant role in reducing uncertainties and fluctuations in the current world economy," Cai said.

PMI data furthers confirms arrival of inflation turning point

Zhang said that a dip in the Purchasing Price Index has shown a drop in cost pressures on enterprises and implied that enterprises will move to cut inventories because of price expectations.

Cai believes that the declines of the growth rate and level of the bulk commodity price have obviously reduced inflation pressure, and currently, China should pay more attention to the fierce price turbulence's influence on the market, and meanwhile be aware of the influence from the uncertainty of the price of international market on China's economy.

Be aware of influence from worsening external environment

According to data, China's import and export indexes both decreased obviously in October. The bad import and export data was a main reason for the PIM decline of October. Insiders believe that the worsening external environment's influence on China's economy is gradually showing.

Zhang said that, according to a previous survey by the MOC, export enterprises' order already decreased before October, and both the import and export order indexes decreased in October, indicating that the growth rate of China's exports will further decrease in the future. Since exports, as one of the three forces driving China's economic growth, are not good, China's economic growth rate probably will continue to decrease in the fourth quarter of 2011.

 
 
     
 
 
 
     
 
 
 
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Jack Smith, USA at 2011-11-0424.26.135.*
Why are the hardworking Chinese people being asked to sacrifice for the benefit of lavish and lazy Europeans and Americans. This makes no sense. Jack Smith, USA
  

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