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POLITICAL ECONOMY
EU business optimism in China at all-time low: survey
by Staff Writers
Beijing (AFP) May 30, 2013


China manufacturing rebounds in May
Beijing (AFP) June 01, 2013 - Manufacturing activity in China unexpectedly rebounded in May from the previous month, official data showed on Saturday, pointing to a stabilisation in the world's second largest economy.

The purchasing managers' index (PMI) grew to 50.8 in May, from 50.6 the month before, according to the National Bureau of Statistics.

The PMI is a widely watched indicator of the health of the Chinese economy, with a reading above 50 indicating expansion while anything below that pointing to contraction.

The reading was higher than an average forecast of 49.8 by analysts polled by Dow Jones Newswires.

"The modest rise of the manufacturing PMI shows that the economy has been stabilising," said Zhang Liquan, an analyst with CFLP, the firm that compiles the index for the statistics bureau.

Manufacturing had slowed in April from 50.9 in March but still showed expansion with May's figures indicating an eighth consecutive month of increasing manufacturing activity.

British bank HSBC, whose own PMI survey focuses more on smaller enterprises, said last week that its preliminary manufacturing index for May fell to 49.6 from a final 50.4 in April.

It was the lowest figure since October's 49.5, according to the bank's data, and the first time it had been below 50 since then.

HSBC's final figure for May is due out on Monday.

China's economy expanded 7.8 percent in 2012, its slowest pace for 13 years, in the face of weakness at home and in key overseas markets.

Analysts had hoped the economy would rebound this year and drive growth globally after expansion of 7.9 percent in the last three months of 2012, snapping seven straight quarters of slowing expansion.

But the government in mid-April announced a surprisingly weak economic growth rate of 7.7 percent for the first quarter, below market expectations and fuelling fears the recent pick-up is faltering.

The International Monetary Fund this month cut its 2013 growth forecast for China to "around 7.75 percent", while Beijing in March kept its growth target for 2013 at 7.5 percent, unchanged from last year.

Optimism about profitability among European companies in China has fallen to an all-time low, a survey showed Thursday, with only 29 percent saying the outlook was positive in the world's number two economy.

The statistic in the European Union Chamber of Commerce in China poll of more than 500 of its members was down from 34 percent last year and the lowest since the first survey in 2004.

"Financial performance is worsening and optimism about profitability is at its lowest ebb," Davide Cucino, president of the European Chamber, said in a statement.

The survey, which was carried out in March, showed 64 percent of respondents reported profitability for 2012, down from 73 percent in the previous year.

The underperforming Chinese economy was a key reason for dampening market sentiment as a stronger recovery had been expected, Adam Dunnett, secretary general of the European Chamber, told a press conference.

"The figures that we've seen coming out of the National Bureau of Statistics... have shown... we are in for a longer haul, so I think that has caught some people by surprise that it hasn't been a sooner recovery," he said.

China's economy grew 7.8 percent in 2012 -- its slowest pace in 13 years -- and registered a surprisingly weak 7.7 percent expansion in the first three months of this year, well below forecasts.

Other challenges faced by European companies operating in the country included increased competition, rising labour costs and a sluggish global economy, according to the survey.

The situation was exacerbated by China's limits on market access and a demanding and sometimes discriminatory regulatory environment, which led to lost revenues estimated at 17.5 billion euros ($22.7 billion) last year, said Cucino.

But the country remains important in European firms' global strategies, with 45 percent of respondents saying China accounted for more than 10 percent of their worldwide revenues, the survey showed.

The rate is unchanged from last year but represents a sharp rise from 30 percent in 2009.

Most firms hope China's new leaders will carry out long-awaited reforms to promote greater rule of law and a level commercial playing field, but are unsure whether the issue will be addressed seriously, the poll said.

Cucino called for an "efficient and well-functioning business environment that has equal competition at its core".

Asked whether an ongoing trade dispute between China and the European Union over solar panels -- where Chinese firms have been accused of selling below cost in Europe -- and telecommunications equipment could escalate into a trade war, Cucino said he was worried about retaliatory measures.

"Who would not be concerned?" he said. "We urge that both sides would engage in friendly negotiations to reach any possible, amicable solutions to the issue. This is especially to avoid any imposition of any measure."

European Union member states are due to vote on June 5 whether to impose a heavy 47 percent tariff on solar panels made by China, the EU's second-largest trading partner.

Trade between China and the EU totalled $546 billion last year, according to Chinese government figures.

The EU is also planning to investigate Chinese manufacturers of telecom equipment such as giants Huawei and ZTE.

In apparent response, Beijing is investigating several European chemical companies for alleged dumping, its second move against European industry in less than two weeks after opening a probe into unwelded pipe manufacturers.

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