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US, Europe woes hit China manufacturing: HSBC
by Staff Writers
Beijing (AFP) Dec 30, 2011

China's manufacturing activity continued to shrink in December, HSBC said Friday, as economic strife in the key European and US markets hobbled demand for the nation's goods.

The final HSBC purchasing managers' index (PMI) reached 48.7 in December, slightly better than the 47.7 in November but lower than preliminary PMI of 49 released earlier this month, as new orders dropped.

A reading above 50 indicates expansion while a reading below 50 suggests a contraction.

While the figures are a slight improvement, the data adds to mounting evidence export-driven China is slowing and will ratchet up pressure on Beijing to further loosen monetary policies to prevent a painful hard landing.

Manufacturing activity contracted in November for the first time in 33 months, while consumer prices rose at their slowest pace in more than a year and industrial output growth hit its lowest level since 2009.

"Weakening external demand is starting to bite," Qu Hongbin, HSBC chief economist, said in a statement.

"This, plus the ongoing property market corrections, adds to calls for more aggressive action on both fiscal and monetary fronts to stabilise growth and jobs, especially with prices easing rapidly.

"Hard landings should be avoided so long as easing measures filter through in the coming months."

Beijing is anxious to prevent a sharp slowdown in the economy but at the same time it wants to avoid reigniting inflation, which hit a more than three year high of 6.5 percent in July but has since slowed.

The government has also enacted a series of policies to cool the red-hot property market, and official data has shown that home prices in most major Chinese cities fell in November from the previous month.

In a bid to boost growth and counter turmoil in Europe and the United States, China cut the amount of money banks must hold in reserve for the first time in three years late last month.

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