Chinese Manufacturing Index Rises to 12-Month High

Aug. 3 (Bloomberg) -- A Chinese manufacturing index climbed to a one-year high in July as stimulus spending stoked domestic demand, countering a slump in exports.

The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 52.8 from 51.8 in June, CLSA Asia-Pacific Markets said today in an e-mailed statement. That was the fourth monthly expansion.

A government-backed manufacturing index released Aug. 1 also showed manufacturing expanded as record lending and a 4 trillion yuan ($585 billion) stimulus package drove an economic rebound. China may overtake the U.S. as the world’s largest manufacturer by 2015 as a recession cuts production in the U.S., according to economics forecaster IHS Global Insight.

“Manufacturing activity continues to accelerate and, importantly, orders growth is being driven by the domestic economy,” said Eric Fishwick, head of economic research at CLSA in Hong Kong. Overseas demand “remained lackluster,” he said.

China’s stimulus spending and subsidies for consumer purchases have countered a collapse in exports and helped companies from chipmaker Semiconductor Manufacturing International Corp. to automaker General Motors Co. The economy rebounded to 7.9 percent growth in the second quarter from a year earlier.

Policy makers will take their cue from the U.S. on when to end economic rescue efforts, central bank Governor Zhou Xiaochuan said July 28 in Washington.

‘Aggressive’ Response

IHS Global Insight spokesman Jim Dorsey confirmed today the company’s forecast for China overtaking the U.S. as the world’s biggest manufacturer, which was published by the Wall Street Journal. Last year, its estimate was for 2016 or 2017, the newspaper said.

The “aggressive policy response so far will further fuel growth for the remainder of this year to push China forwards in the recovery trajectory,” said Wang Qing, chief Asia economist for Morgan Stanley in Hong Kong.

Banks extended $1 trillion of new loans in the first half, triple the amount a year earlier, stoking concern that the recovery may come at a cost of bad loans, bubbles in stocks and property and resurgent inflation. The CSI 300 Index of stocks is up almost 90 percent this year.

Stimulus measures helped an estimated increase of more than 70 percent in General Motors’ vehicle sales in China in July. Semiconductor Manufacturing, China’s biggest chipmaker, said its factories will be more fully used this quarter than in the previous three months as demand improves.

The nation that’s the world’s second-biggest exporter reported its slowest economic growth in almost a decade in the first quarter after global trade collapsed. China’s exports started to slide in November and shrank 21.8 percent by value in the first half of 2009 from a year earlier.

In Guangdong, a manufacturing hub on the nation’s east coast, exports are recovering, the official Xinhua News Agency said July 20, citing the provincial trade bureau. They may return to growth in the fourth quarter, the bureau said.

By Bloomberg News