Experts say manufacturing slowdown 'natural' part of transition
Although China's manufacturing sector is facing downward pressure as shown by recent economic data, it is a natural situation during China's process of economic reform and will not result in any major crisis, experts noted on Wednesday.
Flagging demand dragged China's giant factory sector into its sharpest contraction in 78 months in September, a private survey showed on Wednesday, triggering a flight to safety in Asian markets that analysts said could extend across the globe.
The bleak data came after the US Federal Reserve refrained from lifting interest rates for the first time in nearly a decade last week, citing concerns that global problems, and China's slowing economy in particular, may hurt the US recovery.
The preliminary Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) fell to 47.0 in September, the worst since March 2009, missing market expectations for 47.5 and slipping from August's final 47.3. Levels below 50 signify a contraction.
A separate index from the National Bureau of Statistics released on September 1, however, showed that China's PMI in August was 49.7, down from 50 in July.
It was the seventh consecutive month during which China's manufacturing sector shrank, and the survey showed business conditions deteriorating almost across the board, as firms slashed output, prices and jobs at a faster pace as orders fell.
Lu Qianjin, an international finance professor at Fudan University, said that the shrinking manufacturing sector is a "normal phenomenon" in the middle of China's economic reform process.
Chen Naixing, a researcher at the Institute of Industrial Economics at the Chinese Academy of Social Sciences, also told the Global Times on Wednesday that China's "manufacturing boom" in the past was largely due to an increasing supply of labor under a GDP-oriented model.
But as China enters the "new normal" period, during which it pursues a more sustainable economic growth pattern, labor supply decreases, which in turn leads to slumping manufacturing production.
"The manufacturing sector is facing downward pressure now, but it's still controllable and wouldn't trigger any major economic crisis," he said, that a recovery of China's manufacturing sector is reliant upon technical upgrading, which he believes will be achieved in about three years.
Global investors and policymakers have been on edge over the health of China's economy this year, as it looked set to log its weakest performance in at least one-quarter of a century.
In the U.S., a study showed well-heeled shoppers spooked by whipsawing stock markets and consumers waiting for the best deals could result in the weakest US holiday sales season for retailers this year since 2010.
Chen, however, cautioned that China has contributed a great deal to the world's economy through increasing exports.
Data from China's General Administration of Customs released on September 8 showed that exports in August totaled 1.204 trillion yuan ($189 billion), up 1 percent compared with July.
Chen also pointed out that many Chinese investors have set up companies overseas, lending great support to those countries' employment situations.
The woes of small Chinese companies, accounting for up to 80 percent of urban employment and 60 percent of China's GDP, could be a harbinger of hard times ahead.
But Lu told the Global Times on Wednesday that he's confident that the government would roll out more policies to support China's small companies and that those policies would be eventually successful in helping those companies out of their difficulties.
