The mainland's manufacturing activity, which last month rose at the quickest pace in five months, may slow as a result of the global credit crunch, analysts have warned. The credit crunch triggered by the United States subprime mortgage crisis would undermine consumer confidence globally and lead to fewer manufacturing orders for mainland firms, the analysts said. The Purchasing Managers' Index rose to 56.1 from 54 in August, according to the China Federation of Logistics and Purchasing, which compiles the index on behalf of the National Bureau of Statistics. That was the highest reading in five months. A PMI reading of more than 50 indicates an expansion while one below 50 suggests contraction. The PMI is based on a survey of more than 700 companies. Raymond So Wai-man, an associate dean of the faculty of business administration at the Chinese University, said the latest PMI had not reflected the impact brought by the recent global crunch. 'Generally, orders are placed two to three months ahead of manufacturing,' Mr So said. While central banks worldwide, led by the US, had injected funds into their financial markets, Mr So said the real impact would emerge only after companies released earnings reports. 'Confidence in consumption will be hurt when the results reflect the impact of the subprime mortgage problems,' he said. Mainland exports slowed in August following the credit crisis in the US, the largest buyer of mainland goods. Overseas shipments rose 22.7 per cent to US$111.3 billion from August last year, 11.5 percentage points lower than in July. Charles Li Kui-wai, an associate professor of economics and finance at City University of Hong Kong, said despite slowing exports, the mainland's domestic market would fuel the growth in manufacturing. 'The PMI is mainly affected by its own fluctuating nature and doesn't mean China's economy will accelerate,' Zhang Liqun, a senior research fellow at the State Council's Development Research Centre, told Bloomberg. 'Instead, with macro policies gradually showing effect, growth in industrial production has declined since July.' To curb a flood of low-value products, Beijing has imposed new rules requiring exporters to pay refundable cash deposits of up to 100 per cent when buying 1,853 types of raw materials such as plastics and metals. After concerns raised by the Hong Kong government and businesses in the Pearl River Delta, the central government relaxed the requirement by allowing exporters to settle the deposit with a letter of credit, bank guarantee or other non-cash payment. Mr So said he expected Beijing to move low-end manufacturing business from coastal centres to inland cities to reduce pollution in key cities, which in turn would engage in more high technology and value-added processing businesses.