Chinese Manufacturing Gauges Fall as Slowdown Persists

Two gauges of China’s manufacturing fell in June, underscoring a sustained slowdown in the nation’s economy as policy makers seek to rein in financial speculation and real-estate prices.

An official Purchasing Managers’ Index dropped to 50.1, the lowest level in four months, from 50.8, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. A private PMI from HSBC Holdings Plc and Markit Economics was 48.2, the weakest since September. Readings above 50 signal expansion.

Weaker gains in manufacturing and a cash squeeze in the banking system add to odds that Li Keqiang will become the first premier to miss an annual growth target since the Asian financial crisis in 1998. In the latest signal that policy makers will tolerate slower expansion, President Xi Jinping said local officials shouldn’t be judged solely on their record in boosting gross domestic product.

“Although new leaders have no intention to achieve a higher GDP growth, the current growth rate is quite close to the floor that new leaders have indicated to tolerate,” Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong, said in a note today. The lower official PMI “could worsen concerns that the liquidity squeeze in June will hit economic growth,” Lu wrote.

Expansion probably slowed for a second straight quarter, based on the median estimate in a Bloomberg News analyst survey, after export growth collapsed and Li reined in record credit expansion to contain shadow-banking risks.

Japan Optimism

Markit factory gauges in the euro region and India showed gains for June while one for Germany declined and South Korea’s slipped to the lowest level since November. In Japan, where the central bank is rolling out unprecedented stimulus, the quarterly Tankan survey showed big manufacturers turned optimistic in June for the first time since September 2011.

In China, domestic debt sales dropped 48 percent in June from the previous month to 190.6 billion yuan ($31 billion), according to data compiled by Bloomberg.

The Shanghai Composite Index rose 0.8 percent at the close, the first two-day gain in a month. It fell 14 percent in June, the most since August 2009, on the cash squeeze.

The official PMI matched the median forecast of 33 analysts in a Bloomberg News survey and compared with estimates ranging from 49.7 to 50.6. The median estimate of 18 analysts was for 48.3 in the HSBC index, the same as a preliminary reading given June 20. That gauge was down from May’s 49.2.

Gauges Decline

Today’s official PMI report showed declines in sub-categories including output, new orders, input prices and employment.

It omitted figures for five indexes including export orders, imports and inventories of finished goods, without any explanation for the gaps. The statistics bureau didn’t immediately respond to e-mailed questions asking for comment.

The numbers were published by sources including the Fung Business Intelligence Center, which showed the export orders sub-index at 47.7, which would be the lowest reading since February. The sub-indexes for exports, imports and inventories became available after the initial release in a separate data feed from the China Economic Information Service, said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong.

“The export and import sub-indexes are very important for economists to read the trade and economic situation,” Ding said. “They need to be a bit more consistent in releasing the data.”

Improve Livelihood

The Communist Party should place more importance on achievements in improving people’s livelihood, social development and environmental quality, the official Xinhua News Agency said in the June 29 report on Xi’s remarks.

CSSC Jiangnan Heavy Industry Co., a Shanghai-listed maker of steel structures for buildings and ships, said June 24 that it may report a first-half loss on falling orders and prices.

The logistics federation increased the number of companies in its manufacturing survey to 3,000 from 820 starting with January’s reading. The HSBC report is based on responses from purchasing managers at more than 420 businesses, and is weighted more toward smaller private companies.

The biggest squeeze on interbank credit in at least a decade came at a time when China’s economic slowdown has been deepening, as industrial production and exports trailed estimates in May.

Goldman Sachs Group Inc. China International Capital Corp. Barclays Plc and HSBC Holdings Plc last month pared their growth projections this year to 7.4 percent, below the government’s 7.5 percent goal set at a March conference where Li became premier.

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