MercoPress. South Atlantic News Agency

Chinese New Year helps spur manufacturers’ optimism

The Chinese calendar festivities should boost domestic demand

China has seen an improvement in a key measure of manufacturing, boosting optimism that steady economic growth will continue into 2012. The purchasing managers' index rose to 50.3 in December from 49 in November, the statistical office said. A reading of more than 50 shows expansion.

Increased economic activity for the Christmas holiday period and Chinese New Year have helped demand. The Chinese government pledged in December to guarantee steady growth in 2012.

The purchasing managers’ index (PMI) report is compiled by the China Federation of Logistics and Purchasing (CFLP) on behalf of the statistical bureau.

According to the CFLP, the December figures point to the fact that there will be no significant slowdown in the Chinese economy this year. However, analysts were more cautious in their reactions to the December PMI report.

“Overall, the economy is weakening and it's still too early to tell any clear signs of recovery at this stage,” said Hua Zhongwei of Huachuang Securities.

A separate PMI report from global bank HSBC also showed a small bounce in production. HSBC's China Manufacturing Purchasing Managers Index rose to 48.7 in December from 47.7 in November.

But while that is an improvement it still implies a contraction in output, with a reading of less than 50.

Analysts said that it showed China was continuing to be impacted by external events such as the European debt crisis and weak growth in the US.

They added that should key indicators weaken further in coming months then it may put more pressure on the government to come up with a more pro-growth policy response, such as an interest rate cut.