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China Market Loses Pace Again

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Published on : Aug 21, 2014

The Chinese manufacturing industry showed a weakening growth in August, which could mean that the world’s second-largest economy may soon have to take precautionary measures.

HSBC’s manufacturing index’s preliminary version, which was released on Thursday, showed the Chinese index to decline to 50.3 from its 51.7 in July. The scale is a regular 100-point index, with a number below 50 showing contraction.

The report by HSBC is adding further clarifications to an economy that was already in doubts of slowing down. Recent data shows that while China’s exports continue to grow, its imports have declined considerably, which indicates a low domestic demand.

Earlier this year, the country already injected mini-stimuli that were meant to boost public housing and railways. After a strong surge in growth over the previous decade, China struggles to keep afloat with a growth of 7.5 percent in the April-June quarter of 2014. With 7.5 percent being China’s full-year expansion target, the country will need to take additional measures to maintain this rate till the end of the year.

Experts have suggested that China should focus on domestic consumption rather than rely of growth through exports and investment in factories. Qu Hongbin, HSBC’s chief China economist, said that the current data suggests economic recovery, although it has slowed down again. He added that industry growth activities will stay low for some time, and a support policy is required to consolidate recovery.

Dariusz Kowalczyk, a senior economist at Credit Agricole CIB, stated that the bank is holding at 7.4 percent, but will need help from Beijing to prop up the aggregate demand.

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