Fri, Aug 15, 2008 page11

• China industrial output growth slows to 14.7%

  CHALLENGES Analysts said the slowdown could be an indicator of lower export growth ahead amid a global contraction, rising production costs and tight credit

  • BLOOMBERG
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  China’s industrial output growth cooled last month to the slowest pace since February last year amid weaker export orders and factory shutdowns to clear the air for the Olympic Games.

  Production rose 14.7 percent last month from a year earlier, the statistics bureau said yesterday, after gaining 16 percent in June. That was less than the 15.9 percent median estimate of 20 economists surveyed by Bloomberg News.

  China’s export growth may cool further after rising 22.6 percent in the first seven months, less than the 25.7 percent gain in all of last year.

  The nation needs an emergency plan to stoke investment should export demand suddenly collapse as the global economy weakens, the State Information Center said in a report published yesterday.

  “This slowdown may indicate that export growth will be lower in coming months,” said Ma Jun (馬駿), chief China economist at Deutsche Bank AG in Hong Kong. “Factory closures before the Olympic Games played a small part.”

  A government-backed survey of purchasing managers suggested that manufacturing contracted last month for the first time since the poll began in 2005, with an index of export orders falling to a record low. Exports unexpectedly surged 26.9 percent last month.

  Beijing ordered some factories in and around the city to cut production or shut down ahead of the Games.

  Export weakness and natural disasters were key factors in last month’s slower output growth, Zhu Baoliang (祝寶良), chief economist at the State Information Center, said in the government’s statement.

  China had the worst snowstorms in half a century in January and February, followed by the deadliest earthquake in 32 years in May, and rains and floods in the nation’s south this summer.

  Manufacturers also faced electricity shortages, with power rationed in Shandong, Hubei, Shanxi, Henan and Liaoning provinces. Shandong Xinfa Aluminum and Electricity Group (山東信發鋁電集團), an aluminum maker, said last Friday that a coal shortage was threatening power supplies for its plants.

  China’s economy expanded 10.1 percent in the second quarter from a year earlier, down from 11.9 percent in all of last year.

  This quarter, the government has eased bank lending quotas, raised tax rebates on exports of garments and textiles and halted gains by the yuan against the dollar, shifting emphasis to protecting jobs from fighting inflation.

  The yuan has climbed more than 10 percent in the past year, making exports more expensive and less appealing.

  “China’s manufacturing sector is facing tough challenges due to the global slowdown, rising production costs, tight credit conditions, power shortages and currency appreciation,” said Sun Mingchun (孫明春), an economist at Lehman Brothers Holdings Inc in Hong Kong.

  Factory closures ahead of the Olympics played a “limited” role in restraining last month’s production, Sun said.

  Producer prices jumped 10 percent last month from a year earlier, the fastest pace since 1996. Wages in Chinese urban areas rose 18 percent in the first half to 12,964 yuan (US$1,890). Improved environmental and safety standards and higher energy prices are also pushing up costs.
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