Posted By thestatedtruth.com on November 1, 2009

Nov. 2 (Bloomberg) — Chinese manufacturing data for October showed the nation’s economic recovery is strengthening, giving policy makers more room to pare stimulus measures in coming months.

The Purchasing Managers’ Index rose to a seasonally adjusted 55.2, the highest level in 18 months, the Federation of Logistics and Purchasing said yesterday in an e-mailed statement.

Premier Wen Jiabao’s stimulus package and an unprecedented $1.27 trillion in new loans in the first nine months of this year are sustaining China’s rebound after overseas shipments slumped because of the global financial crisis. In the latest data, an index of export orders climbed to 54.5, the highest since April last year, suggesting global demand is recovering.

“External demand will provide an additional source of support for growth in the months ahead,” said Brian Jackson, Hong Kong-based strategist for emerging markets at Royal Bank of Canada. “This should provide scope for Beijing to start tightening policy from early 2010 while still keeping growth at relatively high levels.”

Jackson said the key one-year lending rate may climb to 6.39 percent from 5.31 percent by the end of next year. The yuan may rise to 6.5 per dollar after staying close to 6.83 for the past 15 months.

UBS AG says the government may tighten by imposing a lending target of about 7 trillion yuan ($1 trillion) for 2010.

Faster Economic Growth

The world’s third-biggest economy may grow 9.5 percent from a year earlier this quarter, Zhang Liqun, of the State Council Development and Research Center, said in the statement. That would be the third straight acceleration and the biggest gain since the second quarter of 2008.

China’s cabinet pledged Oct. 21 to continue monetary and fiscal stimulus even after growth exceeded officials’ expectations for the first nine months of the year. Commerce Minister Chen Deming warned Oct. 31 that the global economy may “plunge” if nations withdraw support measures too quickly.

The latest PMI number was higher than the median estimate of 54.7 in a Bloomberg News survey of 10 economists. A reading above 50 indicates an expansion. Yesterday’s figure compares with a record-low 38.8 in November last year, when recessions in the U.S., Europe and Japan sent export orders plunging.

A jump in the import index to 52.8 from 50.7 “shows an acceleration of domestic demand,” Zhang said.

An output index rose to 59.3 in October from 58 in September and a measure of new orders climbed to 58.5 from 56.8. An index of employment dropped to 52.4 from 53.2.

Auto Sales

Surging auto sales, driven by tax cuts and subsidies, are boosting manufacturing. Passenger-car purchases exceeded 1 million for the first time in September as General Motors Co., the largest overseas automaker in China, reported that sales doubled.

China will sustain its economic rebound this quarter and growth is likely to top the government’s 8 percent target for 2009, the central bank said Oct. 30.

Policy makers need to “manage inflation expectations,” curb excess capacity and encourage sustainable lending growth, the central bank said in its report on the third-quarter economy.

Billionaire investor George Soros said Oct. 30 in Budapest that China will be the “greatest winner” from the global financial crisis, with the U.S. losing the most. Nobel Prize- winning economist Joseph Stiglitz said Oct. 31 that emerging economies including China need to guard against “bubbles” caused by surging liquidity as governments around the world stimulate growth.

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 was instituted in January 2005.

More at   http://www.bloomberg.com/apps/news?pid=20601087&sid=a_ThP1U.43VI&pos=3

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