By Bloomberg News March 1 (Bloomberg) — China’s manufacturing expanded by the least in a year in February as output and orders grew at a slower pace. The Purchasing Managers’ Index fell to a seasonally adjusted 52, according to Li & Fung Ltd., a Hong Kong-based company that releases data for the Federation of Logistics and Purchasing. That was less than 55.8 in January and the median 55.2 estimate in a Bloomberg survey of 15 economists. The world is counting on China to drive growth as Europe’s recovery falters and the U.S. grapples with high unemployment. The Shanghai Composite Index has fallen about 7 percent this year on concern that the Chinese economy may lose momentum as the government reins in stimulus to counter overheating risks. “We are still in strong expansionary territory, but we believe some of the momentum of the recovery we experienced in 2009 is fading,” Stephen Green , an economist at Standard Chartered Plc in Shanghai, said before today’s data. Last month’s Lunar New Year holiday may have damped orders, he said. In today’s data, a reading over 50 indicates an expansion. An index of export orders fell to 50.3 from 53.2 in January. The output index fell to 54.3 from 60.5. Cooling Credit China’s economic growth accelerated to 10.7 percent, the fastest pace since 2007, in the fourth quarter on stimulus spending, subsidies for consumer purchases and record lending. Increased demand was a factor in Baoshan Iron & Steel Co. , China’s biggest publicly traded steelmaker, raising prices for March delivery. Policy makers are cooling credit growth to restrain inflation and limit the risk of soured loans and asset- price bubbles as property prices surge in cities such as Shenzhen and Sanya. The central bank has twice raised lenders’ reserve requirements this year. Analysts will watch for any policy shifts when Premier Wen Jiabao makes an annual address to the nation on March 5 at the National People’s Congress in Beijing. In a Feb. 27 webcast, he reaffirmed a “moderately loose” monetary policy and said 2010 would be a complicated mix of sustaining the economic expansion, adjusting the nation’s growth model and managing inflation expectations. Manufacturers have been getting a boost from exports, with overseas shipments climbing for a second straight month in January after plummeting because of the financial crisis. Subsidies within China for car and home-appliance purchases and tax rebates for exporters will continue this year, the government said. Yuan’s Peg The central bank is also yet to loosen the yuan’s effective peg to the dollar, which has kept the currency at about 6.83 since July 2008, shielding exporters from the slump in global demand. “Foreign demand is improving, and consumption growth remains solid,” Dariusz Kowalczyk , chief investment strategist at SJS Markets Ltd., said in Hong Kong before today’s data. China’s growth in the first half will be “so strong that it can be characterized as overheating,” Kowalczyk said, forecasting “further policy tightening.” After last year overtaking the U.S. as the biggest auto market and Germany as the biggest exporter, China is poised to overtake Japan this year as the second-largest economy. The nation will contribute more than a third of global growth in 2010, according to Nomura Holdings Inc. Today’s PMI figure was up from a record-low 38.8 in November 2008, when recessions in the U.S., Europe and Japan sent export orders plunging. The manufacturing index, released by the logistics federation and the Beijing-based National Bureau of Statistics, is based on replies to questionnaires sent to purchasing executives at more than 730 companies in 20 industries. It started in January 2005. — Li Yanping and Sophie Leung . Editors: Paul Panckhurst , Lily Nonomiya . To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net Sophie Leung in Hong Kong at +852-2977-6126 or sleung59@bloomberg.net
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China’s Manufacturing Expands Less Than Economists’ Estimates for February
