The National Bureau of Statistics index of purchasing managers in July shows the economy may stabilize in the coming months after blistering growth in the first six months, analysts said.

 

The index, which was compiled by the China Federation of Logistics and Purchasing on behalf of the bureau and released yesterday, fell to 53.3 last month from 54.5 in June. A reading of over 50 indicates an expansion in business activity.

 

It has fallen for the fourth consecutive month and the July figure was a five-month low.

 

"It shows decreased orders for the coming months," said Zhu Baoliang, an economist from the State Information Center. "This is not surprising as the country has taken measures to cool the economy, which will lead to decreased exports in July and August," he told China Daily.

 

China's gross domestic product grew by 11.5 percent and CPI growth hit a 33-month high of 4.4 percent in June, with fixed-assets investment and lending also hovering at high levels, triggering widespread concerns about an overheating economy.

 

The country has started to reduce or remove the export rebate of more than 2,800 products from July 1 in its efforts to dampen exports and narrow trade surplus.

 

The new export orders index by the statistics bureau fell to 53.5 in July from 55 in June.

 

"Exporters have rushed to beat the tax rebate adjustment before July 1 and therefore the orders would drop in the coming months," Zhu said.

 

The index would continue to drop but in a gradual manner this year, he said.

 

A similar purchasing managers' index for China's manufacturing sector, which was released by the Hong Kong-based CLSA, a brokerage and investment banking arm of French bank Credit Agricole, also dropped to 53.2 in July from a 27-month high of 55 in June. The fall is due to decreased new orders, particularly for exports, according to the survey's compiler.

 

Zhu said more than half of China's industrial products are for exports and reduced exports have led to the falling index.

 

Given the red-hot economic growth in the first half of this year, Zhu forecast that the interest rates may be raised again within this year.

 

As a result of the tightening measures, China's exports would slow down and imports pick up in the second half of this year, according to research by Zhu's team. "Export growth may slow down to about 25 percent and imports rise to around 20 percent," Zhu said.

 

(China Daily August 2, 2007)