China in stable growth mode

A worker at an equipment manufacturing plant in Nantong, Jiangsu province. Xu Ruiping / For China Daily

BEIJING - Manufacturing accelerated in China for a second straight month in September, adding to signs the fastest-growing major economy is stabilizing after policy makers curbed lending in an effort to avert asset bubbles.

A purchasing managers' index (PMI) released on Wednesday by HSBC Holdings Plc and Markit Economics rose to 52.9, the highest level in five months, from 51.9 in August. The data are seasonally adjusted and readings above 50 indicate an expansion.

Government pledges this month to ensure the completion of construction projects under a fiscal-stimulus plan and to increase public housing may add momentum.

China's growth has helped pull in imports from around the world, preventing a deeper moderation in the global recovery, and Wednesday's report contrasts with evidence of a deteriorating outlook for Japanese manufacturers.

"This is the beginning of a multi-month upswing in the PMI for mainland as Beijing strengthens its commitment to complete stimulus projects," said Glenn Maguire, chief Asia Pacific economist at Societe Generale SA in Hgong Kong. "The HSBC PMI is consistent with the floor having been established beneath Chinese economic activity."

Earlier this week, the government reported that industrial companies' profits climbed 55 percent in the first eight months of 2010 from a year earlier, giving them firepower to step up investment spending.

A separate government-backed PMI is likely to be released on Oct 1. The index, released by the National Bureau of Statistics and the Federation of Logistics and Purchasing, may rise to 52.5 from an August reading of 51.7, according to the median forecast of 15 economists surveyed by Bloomberg News.

China's car-sales growth accelerated for the first time in five months in August, according to data from the China Association of Automobile Manufacturers. Auto sales in China is set to outpace the United States for a second year, spurring carmakers including PSA Peugeot Citroen, Toyota Motor Corp and Nissan Motor Co to boost capacity or plan new models.

The output-price index in Wednesday's report jumped to an eight-month high, reflecting higher costs of raw materials including steel and copper. The measure rose to 59.4 from 52.3 in August, while the input-price gauge soared to 67.7 from 56.2, according to an e-mailed report by HSBC economist Qu Hongbin.

The People's Bank of China has raised banks' reserve ratios and tightened mortgage rates for multiple home buyers. Economic growth slowed to 10.3 percent last quarter from an annual pace of 11.9 percent in the prior three months.

The PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 430 manufacturing companies. The data track back to April 2004.

Bloomberg News