China’s economy shrinks

December 1st, 2008 - 6:33 pm ICT by IANS  

Beijing, Dec 1 (Xinhua) The Purchasing Managers’ Index (PMI) of China’s manufacturing sector dropped to 38.8 percent in November, down 5.8 percentage points from October, indicating that the country’s economy has further contracted, the China Federation of Logistics and Purchasing (CFLP) said Monday. It was the index’s lowest point since the CFLP initiated the survey with China’s National Bureau of Statistics in 2005.

It was also the fourth time China’s PMI declined below 50 percent within this year, which reflected the country’s economy had further contracted, analysts said.

The PMI included a package of indices used to measure a country’s monthly economic performance. China’s PMI was conducted on the base of surveys directed at purchasing and supply managers of more than 700 manufacturers across the country.

A reading above 50 percent suggests expansion, while one below 50 percent rings alarm for economic slowdown.

Index measuring new orders dropped to 32.3 percent in November, down 9.4 percentage points from October. That of new orders for export eased to 29 percent, shedding 12.4 percentage points from the previous month.

Zhang Liqun, a researcher with the Development Research Center of the State Council, China’s Cabinet, said the PMI decline indicated the decelerating trend of Chinese economy.

However, Zhang said that “the government had taken a string of macro-management policies in an active manner and it would take some time for the effects to surface.”

China unveiled an economy stimulus package last month with a total of four trillion yuan ($583.4 billion), equivalent to nearly 78 percent of last year’s national fiscal revenue, to be invested in the next two years to boost domestic demand and improve people’s livelihood.

The People’s Bank of China (PBOC), the country’s central bank, said it would cut the benchmark one-year yuan lending rate to 5.58 percent from 6.66 percent and the one-year yuan deposit rate to 2.52 percent from 3.60 percent.

It was the fourth interest rate cut since mid-September. It also was the largest cut since October 1997, when the PBOC slashed the one-year rate by 1.44 percentage points to support growth amid the Asian financial crisis.

Zhang predicted that once the policies took effect after the spring next year, China’s economy would move on a relatively fast growth track.

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