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China economy
China

China manufacturing gathers pace, but risks from high debt loom

Data on factory activity beats market expectations, but analysts still expect economic slowdown as the authorities try to reduce soaring levels of debt

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A worker pictured making shipping containers at a plant in Jiangsu province. Photo: Bloomberg
Reuters

China’s manufacturing grew at the quickest pace in three months in June, buoyed by strong new orders in a sign of stabilising growth, although analysts expect a further slowdown in the world’s second-biggest economy is inevitable as Beijing cracks down on debt risks.

The surprising strength in the vast manufacturing sector defied expectations for a cooling, thanks to robust external demand that underscored why global central banks were confident enough to switch gears to a more hawkish stance.

The official manufacturing Purchasing Managers’ Index was at 51.7 in June, the eleventh straight month of expansion, and up from 51.2 in May, a monthly survey by the National Bureau of Statistics showed on Friday.

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It was the fastest pace since March and beat the 51.0 level predicted by analysts in a Reuters survey.

The survey supports broad consensus that China’s economy is stabilising at a moderate pace rather than slowing sharply, suggesting that Beijing is on track to meet its annual growth target of 6.5 per cent for this year – encouraging news for President Xi Jinping ahead of a major leadership reshuffle in the autumn.

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