Today’s data show that weakness in demand, including for exports, is starting to weigh on employment in manufacturing, HSBC said in a statement. The preliminary report is based on 85 percent to 90 percent of responses to a monthly survey of purchasing executives at more than 420 companies.
“Beijing is expected to respond strongly to sustain the economic recovery by increasing efforts to boost domestic investment and consumption in the coming months,” said Qu Hongbin, chief China economist with HSBC in Hong Kong. Investors are assessing where the nation’s growth rate may settle as the working-age population declines, labor costs and incomes rise and officials wrestle with the environmental toll from polluting factories. The answer may be determined partly by the speed of efforts to tackle state monopolies and open the economy to more market forces.
“China’s undergoing economic restructuring, which sometimes is not in lockstep with growth,” Zhou said in an interview on April 20. “We need to sacrifice short-term growth for the purposes of reforms and structural adjustments.”
China economy grew 7.7 per cent in the first quarter of 2013 from a year earlier, a surprising slowdown that underlines the challenges facing the country’s new leaders as they try to keep growth on track while also pursuing deeper economic reforms. Gross domestic product had rebounded to 7.9 per cent growth in the final quarter of last year, ending a near two-year slowdown.
Most analysts had expected the economy to have a stronger start to 2013
China has posted a surprise trade deficit in March as imports rose more-than-expected on stronger demand for commodities such as copper and oil.
Analysts said the deficit may signal that domestic demand is picking up and China’s attempts to move away from export-led growth were working.
Imports surged 14% from a year earlier. Analysts were expecting a 5% increase.
Exports only rose by 10%, leading to a $884m (£577m) deficit. There was a surplus of $15.3bn in February.
However, some analysts tempered the enthusiasm, saying trade data for China is unpredictable at the beginning of the year because of the Lunar New Year holiday when many factories shut down. Some observers have also questioned the accuracy of data coming out of China in recent months. They claim that official export data released by China sometimes does not match corresponding figures coming from its trading partners. “The 10% headline growth number masks an uncomfortable reality: either the trade data is unreliable, or if it is reliable, then what are being booked as exports are not actually exports,” said Alistair Thornton, senior China economist at IHS Global Insight. Mr Thornton added that “there is plenty of anecdotal evidence to suggest that exporters are faking orders and ’round-tripping’ in order to gain government export tax rebates”. His views were echoed by Francis Lun, managing director of Lyncean Holdings in Hong Kong.”Chinese exporters may have over-reported their value to get export credit rebates because the figures in Hong Kong to and from China do not add up,” Mr Lun claimed.