China’s manufacturing activity continues to decline

Manufacturing activity declined in China in January 2012 for the third consecutive month according to an index of the bank HSBC. Despite entering the Year of the Dragon, China’s growth will not exceed 8.2% in Q1 2012.

China has given signs of slowing. The PMI Purchasing Managers Index for the current month is 48.8, against 48.7 in December and 47.7 in November 2011, said HSBC in a statement. An index above 50 indicates expansion in activity and an index below this value means a contraction.

A slowdown is expected to continue

“This third consecutive index below 50 indicates that growth will probably continue to slow down” in the second world economy, said Qu Hongbin, HSBC’s Chief Economist for China.

In fact, China’s GDP growth fell from 10.4% in 2010 to 9.2% in 2011. In 2011, it has continued to decelerate from 9.7% in the first quarter to 9.5% in the second and the third at 9.1% and 8.9% in the fourth.

“The continued slowdown in investment and exports means more brakes to growth and pressure on manufacturers in the months to come,” says Qu.

The opinion of the banks and experts

“But the demand, particularly domestic demand is not strong enough to reduce inventories and is affected by the global economic environment,” according to Zhang Xinfa, an analyst at Galaxy Securities in Beijing.

“We expect that exports weaken significantly and that the construction sector slows further in the coming months, pulling down growth,” responded Wang Tao, an economist at the Swiss bank UBS, based in Hong Kong.

UBS predicts 8.0% for China’s GDP growth in the first quarter of 2012, while JP Morgan expects 8.2%.