China has pledged more attention to “stabilizing economic growth”
HONG KONG – China has pledged more attention to “stabilizing economic growth” even as data released Thursday by HSBC indicated contraction in manufacturing activity for the seventh consecutive month in May, reinforcing fears that the world’s second-largest economy may slow further in coming months. China’s Cabinet on Wednesday sought to shore up economic weakness in the country, by pledging to give more priority to stabilizing growth and actively boost domestic demand as the economy faces “increasing downward pressure,” the State Council said.
The government should “place stabilizing growth in a more important position and carry out preemptive policy adjustments and fine-tuning more forcefully according to the changing situation,” according to a statement issued after an executive meeting of the State Council presided over by Premier Wen Jiabao, reported Xinhua.
“Some prominent contradictions and problems still exist in the country’s economic development. In particular, the pressure for a downward economic movement is increasing,” the statement said.
In view of the pressures on domestic economy with exports slowing down and world economic recovery more uneven and more difficult, the Chinese government for the first time in eight years scaled back the growth target for 2012 to 7.5 per cent from the goal of 8 per cent.
In the first quarter of 2012, China’s GDP growth slowed to 8.1 per cent from 8.4 per cent in the fourth quarter of last year.
Factory orders in China meanwhile have extended their weakening, declining at a faster rate in May than in the previous month, the HSBC manufacturing Purchasing Managers’ Index (PMI) showed.
The preliminary headline reading of the HSBC manufacturing PMI dropped to 48.7 in May on a 100-point scale, from a final reading of 49.3 for April. A reading below 50 indicates contraction from the previous month.
Export orders were firmly in contraction, reversing from a reading that indicated expansion in April, the survey said.
Factory orders extended their weakening, declining at a faster rate than in April, the PMI showed.
Among the few bright spots in the PMI, factory output rose to a seven-month high of 50.5 from its level of 49.3 in April.
Lowering its optimistic outlook in the April report for the second half of the year, HSBC focused on the need for policy easing to help stabilize the economy.
“Manufacturing activities softened again in May, reflecting the deteriorating export situation. This calls for more aggressive policy easing, as inflation continues to slow,” HSBC’s chief China economist, Hongbin Qu, said in a statement
Qu expressed optimism that the Chinese economy was likely headed for a “soft landing” in the coming quarters, so long as the government provides such easing measures.
In April, Qu forecast China’s economy would accelerate in the second half to an nnualized growth rate of 8.5% for the period.
If HSBC’s final PMI remains below the 50 level, the current streak of contraction will be nearly on par with the eight-month period of declining output that began in August 2008, as the global financial crisis deepened, according to Societe Generale.
In a note, the French bank said China’s current downturn looks more like an ongoing soft patch rather than the previous crisis pattern, which saw a sharp slump followed by a fierce rebound.