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China manufacturing growth continues to slow

Editorial
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China's manufacturing growth fell to its lowest level in eight months in February, according to figures from Beijing’s National Bureau of Statistics.

 The New Straits Times reports that the government’s purchasing managers' index (PMI) came in at 50.2.

Given that all figures over 50 indicate expansion, the sector is still growing. However, this is the third drop in a row for the PMI. The figure in January was 50.5, while December’s figure was 51.0 and November’s figure was 51.4.

In addition, February’s figure was the lowest since the June figure of 50.1. It was the 17th consecutive of a slowing growth rate for the Chinese manufacturing sector.

The slowing reflects a change in government policy. In the past, when faced with a slowing economy, Beijing acted quickly and injected cash to stimulate activity.

Now the government wants consumers and others to play a larger role in economic growth. Large investments of government cash are no longer part of the policy.   

As Bloomberg reports, the preliminary reading of the Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics is also due on April 23.

This index came in at 48 in March. The April reading is expected to rise slightly to 48.3. As Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore points out, an increase can be expected because of recent gains in the price of iron ore.

The correlation between manufacturing in China and the price of iron ore is strong, and it indicates some improvement in manufacturing for April.

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