Wandering China

An East/West pulse of China's fourth rise from down under.

China stays ‘prudent’ in face of manufacturing rise [The Age]


Responding to the external quagmire of global economic markets, China’s central bank announced it would continue ”prudent” monetary policy to strike a balance between economic expansion and inflation.

Internally on the other hand, the World Bank’s Robert Zoellick (reported Jan 7th) will be recommending reforms to China’s domestic financial system as part of broader plans to help wean it from export dependency to sustain economic growth.

– – –

China stays ‘prudent’ in face of manufacturing rise
Lucy Battersby
Source – The Age, published January 2, 2012

Amid predictions of a contraction, China’s manufacturing activity measurement unexpectedly rose, according to one index in Beijing. Photo: Reuters

CHINA’S official manufacturing activity measurement unexpectedly rose last month, contradicting forecasts of a contraction caused by slowing economic growth.

The December manufacturing purchasing manager’s index was 50.3 points, up from 49 points in November, the Beijing-based statistics bureau announced yesterday. A figure above 50 indicates expansion.

In comparison, an index compiled by international bank HSBC Holdings put the December figure at 48.7 points, up from 47.7 in November. The HSBC index has been below 50 for several months, while the government figures indicate a significant improvement in activity in December.

The central bank announced it would continue ”prudent” monetary policy to strike a balance between economic expansion and inflation. The People’s Bank of China loosened its monetary policy in December to add liquidity to the economy. It was the first loosening since early 2009, when the central bank started tightening fiscal policy to battle runaway inflation.

The central bank would keep using macro-prudential policies – such as the recent 50 basis point decrease in bank funding reserve requirements – to maintain the ”intensity, pace and focus” of the economy but keep inflation down, central bank governor Zhou Xiaochuan said in a New Year’s speech published by the government.

Economic growth slowed throughout the year to 9.1 per cent in the third quarter, he added.

”Systematic financial risks will be effectively prevented to promote the healthy and fast development of the national economy,” he said. ”While keeping a reasonable social financing growth, the bank will also optimise the lending structure, deepen financial reforms and improve foreign exchange management.”

President Hu Jintao noted ”the recovery of the world economy is facing growing instability and uncertainty”.

”We will continue to properly deal with the relationship among maintaining a stable and relatively fast economic growth, adjusting economic structure and managing inflation expectations,” he said in a speech on New Year’s Eve. ”We will accelerate the change of economic development mode and structural adjustment, focus on ensuring and improving people’s livelihood and work hard to consolidate the healthy momentum of economic and social development.”

Australia’s exports to China hit $7.2 billion last October. A fall in China’s economic growth would affect Australia’s and the rest of the world’s economy .

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Filed under: Beijing Consensus, Chinese Model, Domestic Growth, Economics, Finance, Government & Policy, Influence, International Relations, Mapping Feelings, Migrant Workers, Politics, Population, Reform, Soft Power, Strategy, Trade

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