Factory growth to slow in 2012 on tight policies

PUBLISHED : Friday, 25 November, 2011, 12:00am
UPDATED : Friday, 25 November, 2011, 12:00am


The government has warned of a slowdown in the mainland's factory growth next year, which may ease to 11 per cent, adding pressure on policymakers to ease some tightening measures now in place.

The Ministry of Industry and Information Technology yesterday forecast the figure to shrink by 1 to 2 percentage points. But Huang Libin, a deputy director general at the ministry, said the mainland's economy would grow an estimated 9.2 per cent this year after a 9.4 per cent pace in the first nine months.

The escalating European debt crisis added uncertainty to the global economic outlook, muddying the picture for the mainland's economy, he added.

'A focus for next year is maintaining stable policies and increasing efforts to support smaller enterprises,' the ministry official said. 'Monetary tightening, yuan appreciation and trade protectionism are still [challenges] for the industrial landscape.'

Daiwa Capital Markets estimates the mainland's gross domestic product (GDP) will wind down to 9.5 per cent growth this year from 10.3 per cent last year, while Deutsche Bank forecasts 9.1 per cent growth.

Daiwa chief economist Sun Mingchun says there is a good chance China will meet its 2011 growth target of 8 per cent as state leaders are more open to relaxing some of the tightening measures if the global economic situation worsens markedly.

Deutsche Bank chief economist Ma Jun believes some modest easing is on the cards, which may be in the form of fewer issues of People's Bank of China bills, increases in monthly lending quotas and cuts in bank reserve ratios.

UBS economist Wang Tao also said she expected some easing in monetary tightening, but would not count on interest rate cuts next year.

The mainland's manufacturing sector is feeling the impact of weaker demand in the West, with the HSBC/Markit flash purchasing managers' index showing the factory sector will grow at the slowest pace in 32 months in November.

The index fell to 48 this month from 51 in October. A reading above 50 means expansion and below it, contraction.

Huang said the garment, textile and electronics sectors would face significant challenges next year because they are export-led and labour-intensive. About 60 per cent of electronics products manufactured in China are exported, he said.

High inflation in wages and raw materials left the electronics sector with wafer-thin profit margins, Huang said, and the 'outlook for the sector is pessimistic'.

Jin Bei, who heads a State Council think tank, said the government would push for technological upgrades in factories.

Meanwhile, Hong Kong's exports jumped 11.5 per cent year on year to HK$305.7 billion in October, stronger than expected. The rapid growth follows a 3 per cent decline in September. Imports leapt 10.9 per cent last month from a year earlier, leaving a trade deficit of HK$23.1 billion.


The mainland's target for industrial growth last year - which it exceeded on robust domestic demand