Asiatic Sourcing Blog

China Manufacturing Accelerates in Growth

Although various industries are still sluggish in China, a recent survey conducted by HSBC Corp reveals that the country is recovering economically from the 2008 downturn. This is particularly true of the manufacturing sector which is showing its strongest rise since the crisis.

December rates for manufacturing climbed to their highest point within the past 18 months. Also, the manager’s index of monthly figures came in at 51.1 percent which is the highest figure that sector has seen since May of 2011. The index scale of 100 points determines growth when the figures pass the 50 mark. November’s figures for the same index heralded a slight expansion with a showing of 50.5.

There are more bright signs on the horizon for those doing business in China. The current momentum is expected to continue throughout 2013 as construction on infrastructure projects ramp up and conditions in the property market regain a positive foothold, both of which provide those seeking China sourcing a breath of relief.

Due to such growth indicators, China is expected to reach 8.6 percent by the end of the year. The 2012 year was being forecast by the International Monetary Fund to reflect the country’s weakest period of growth at 8 percent since the later part of the 1990s so the country slightly outperformed IMFs expectations. Even though low by recent Chinese standards, 8 percent still remains well above Western outputs that are continuously being hampered by the economic crisis. China had forecast reaching an optimistic 10 percent, but fell well short of that figure.

However, weak demand globally, much of which is due to the economic mess, has severely dropped Chinese exports to those who buy from China. December export numbers are expected to be even lower than November which saw a dive to 2.9 percent from 11.6 percent the previous month.

The drop was mostly due to weaker demand from the U.S., Japan, and Europe. The forecast for low new export orders is increasingly compounded because of a variety of market uncertainties on the horizon such as the looming U.S. “fiscal cliff” that would trigger possible automatic spending cuts and tax hikes, placing increased financial pressure on those consumers.

Although companies reported a slight surge in new orders in December in response to the survey conducted by HSBC, 12 percent of Chinese companies said that new orders from exporters decreased somewhat. Chen Deming, China’s commerce minister, earlier trumpeted that same concern by giving a grave announcement in November, telling Chinese exporters that a large number of difficult hurdles would be facing them into the 2013 year and possibly throughout.

With the exception of exported items from China, the country appears to be “back in the saddle” as far as internal manufacturing and economic recovery. China products may sluggishly flowing out of the country, but they are definitely finding more appeal to the rapidly growing Chinese middle class that continues to excel at liberal spending and is rapidly becoming the largest economic driver of the world. Such consumer spending combined with infrastructure growth are driving the economy upward.

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