China Indicator Points to ‘More Moderate’ Growth as Central Bank Tightens

A China leading indicator points to a likely moderation in the growth of the world’s second- biggest economy after export demand weakened, the Conference Board said.

The index rose 0.2 percent to 154.5 in April, the New York-based research organization said on its website today, citing a preliminary reading. Revised numbers showed a 0.9 percent increase in March and 0.1 percent decline in April.

The data “is consistent with more moderate growth in economic activity in coming months,” said the organization’s Beijing-based economist Bill Adams.

Stocks fell globally yesterday and oil slid on concern that Greece will default and amid signs that growth is weakening in the U.S., the world’s biggest economy. The Shanghai Composite Index has tumbled from this year’s April high on tightening measures including an increase in bank reserve requirements announced two days ago.

In China, “the economy is moderating but it is still expanding at a decent pace,” Shen Jianguang, a Hong Kong- based economist at Mizuho Securities Asia Ltd., said before today’s release. “It won’t turn into a hard landing.”

China’s economy grew 9.7 percent in the first quarter from a year earlier.

Higher Rates

Four interest-rate increases since September have yet to stifle inflation that accelerated to 5.5 percent in May. The central bank may raise interest rates this month and again in the third quarter, Nomura Holdings Inc. estimates.

The leading index “has increased modestly in the early months of 2011, supported by expansion in credit and construction activity despite weakness in consumer expectations and production indicators,” Adams said in a statement. “Cooler economic conditions in the U.S. and Europe have also contributed to weaker conditions for the export sector since the beginning of the year.”

The Conference Board first published the index in May 2010. Plotted back to 1986, the gauge has successfully signaled turning points in China’s economic cycle, the organization says.

--Zheng Lifei, Huang Zhe. Editors: Nerys Avery, Paul Panckhurst

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at +86-10-6649-7560 or lzheng32@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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