China’s manufacturing sector continues to shrink

Posted on 22 Jun 2012 by Chris Flynn

China’s manufacturing sector has contracted at the fastest rate for seven months.

HSBC’s manufacturing Purchasing Managers Index (PMI), which ranks the health of the sector based on output, new orders and employment, fell from 48.8 in May to 48.1 in June as the global economic slowdown continues to adversely affect China.

With any figure below 50 indicating a contraction, overall conditions within China’s manufacturing sector continue to deteriorate. Although the pace of slowdown had previously looked as though it was easing, HSBC’s Flash Manufacturing PMI for June suggests otherwise.

Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, chief economist and joint head of Asian Economic Research at HSBC argued that “the pace of slowdown seems to be slowing.”

Mr Qu added that he expects the government to step up its efforts to increase domestic demand with exports likely to decelerate in the coming months. “The sharp fall of prices and moderation of new orders suggest weak domestic demand, posing destocking pressures for Chinese manufacturers,” he said.

Nicholas Emmerson, a partner at international law firm Eversheds, said: “The boom is over and a chill wind is beginning to blow across the region. China is slowing as it manufactures what the world demands. As the rich West has stopped buying, it will inevitably affect China.”