Chinese Manufacturing Accelerates as Asia Leads Global Rebound Share Business Exchange

By Bloomberg News Dec. 1 (Bloomberg) -- China’s manufacturing grew last month at the fastest pace in five years, a survey showed, helping Asia to lead the recovery from the global economic slump. The purchasing managers’ index released by HSBC Holdings Plc rose to a seasonally adjusted 55.7 from 55.4. The government’s PMI, also published today, held at an 18-month high. A report later today may show that U.S. manufacturing grew for a fourth month in November, a Bloomberg News survey showed. Stocks rose around the world after the Chinese figures added to evidence that the country is powering a global recovery from the worst recession since World War II. Australia’s central bank cited the speed of Asia’s rebound in today’s unprecedented decision to raise interest rates for a third straight month. India beat economists’ forecasts yesterday with 7.9 percent growth in the third quarter and South Korea said today its exports gained for the first time in 13 months. “China’s at the center of Asia’s outperformance and that will continue to be the case at least through the first half of 2010,” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. “Without China’s aggressive policy response to the crisis, the region wouldn’t be where it is now.” The MSCI Asia-Pacific Index climbed 1.2 percent, Europe’s Dow Jones Stoxx 600 Index gained 1.6 percent and Standard & Poor’s 500 futures advanced 0.5 percent. The euro advanced 0.4 percent to $1.5064. The yen slid 0.7 percent against the dollar. Chinese Stocks Twelve-month non-deliverable yuan forwards were little changed at 6.6305 per dollar as of 5:21 p.m. in Shanghai. The Shanghai Composite Index closed 1.3 percent higher, extending this year’s gain to about 78 percent. The HSBC PMI rose to the highest level since the 57.1 reading in the survey’s first month in April 2004. HSBC’s report painted a brighter picture of export demand than the official survey. The PMIs have different methodologies. “China’s recovery has been consolidated,” said Qu Hongbin, the chief China economist at HSBC in Hong Kong. Australian central bank Governor Glenn Stevens said today that capital flows into Asia and other emerging markets have been picking up and the region’s financial sectors are not “impaired.” China and India are the fastest-growing of the world’s major economies. In China, gross domestic product will expand 10.5 percent this quarter, helping the government to top its 8 percent target for the year, according to the median estimate of 38 economists. The nation’s growth fuels demand for Australian resources such as iron ore. German Economy Growth in Asia is helping the rest of the world. Euro- region manufacturing expanded more than economists originally estimated in November and German unemployment unexpectedly dropped, separate reports showed today. The U.S. Institute for Supply Management’s manufacturing index probably slipped to 55 from October’s three-year high of 55.7, according to the median forecast of 72 economists surveyed by Bloomberg News. The report is due at 10 a.m. New York time. The world’s recovery from the financial crisis is nevertheless still uneven. Dubai shares tumbled and Abu Dhabi’s stock index dropped the most in at least eight years on Nov. 29 after the government announced state-run Dubai World may delay debt payments. In Russia, a manufacturing contraction deepened last month after export demand sagged, raising concern that a recovery in the world’s biggest energy exporter may be stalling, VTB Capital’s Purchasing Managers’ Index showed. An index of U.K. manufacturing fell to 51.8 in November from 53.7, Markit Economics said. Economists had predicted a reading of 54. Emergency Meeting The pace of Chinese growth is also causing some political tension as it refuses to bow to calls to allow the yuan to appreciate. Premier Wen Jiabao rebuffed yesterday calls by European leaders for China to let its currency strengthen, saying that a stable yuan helped global financial stability. The nation has effectively pegged the yuan to the U.S. currency since July last year to shield exporters from slumping global demand. The stability of China’s currency against the dollar contrasts with gains this year by the yen and the euro that have hurt exporters in Japan and the euro region. After an emergency meeting today, Japan’s central bank said it would provide short- term loans to commercial banks, aiding an economy that is also grappling with deflation. Eisuke Sakakibara, formerly Japan’s top currency official, said today that the yen may rise beyond 80 per dollar by March, approaching its 1995 record, and any attempts to halt its advance through intervention will fail. Chinese Investment In China, growth is stabilizing and becoming more sustainable, and government investment, which is driving the recovery, will gradually be reduced, Zhang Liqun, a researcher at the State Council Development and Research Center, said in the statement with the government’s PMI. The “velocity of the recovery in China has indeed been surprising,” Marius Klopper, the chief executive of BHP Billiton Ltd., the world’s largest mining company, said Nov. 26. “Chinese growth will continue and will continue to be resources-intensive.” Still, Kevin Lai, an economist at Daiwa Institute of Research in Hong Kong, saw signs of weakness in the government’s PMI, as indexes of orders, including for exports, slipped even as a measure of output rose. “Instead of everything being positive we begin to see things being a little bit mixed,” Lai said. “Global demand is getting a little bit soft again.” In a note, Goldman Sachs Group Inc. called the PMI “slightly disappointing but not weak.” Inflation Pressures Both PMIs showed input prices climbing, signaling inflation pressures. Overall, the government PMI was unchanged at a seasonally adjusted 55.2, the Federation of Logistics and Purchasing said. That was less than the median estimate of 55.7 in a Bloomberg News survey of 17 economists. The government is on alert for inflation and asset bubbles after an unprecedented $1.3 trillion of new loans in the first 10 months of 2009 drove a rebound from the nation’s weakest growth in almost a decade. “The recovery is quite strong with all economic indicators except exports now pretty much back to pre-crisis levels,” said Isaac Meng, a senior economist at BNP Paribas SA in Beijing. “The key challenge is how to cool off excessive liquidity and pre-empt the asset bubble and inflation risks.” For Related News and Information: Most-read stories on China: MNI CHINA 1W Most-read China economy stories: TNI CHECO MOSTREAD BN For top economic news: TOP ECO For top China news: TOP CHINA Credit crunch page: WCC Government relief programs: GGRP