Telephone:0086-532-82816193 Mobile Phone:13792836565 Fax:0086-532-82815801 Address:Room708, Zhen Ye Mansion, No2 Shi Chang Road, North District, Qingdao,266072, China Zip:266072 Country/Region:China (Mainland) Province/State:Shandong City:Qingdao
Calm at PMI slide
Date:2013-06-21writer:from:China DailyClick the number:986
The Chinese economy seems to be in a crisis again - at least it does in the eyes of panicking investors.

Slumping factory activity, as indicated by the flash HSBC Purchasing Managers' Index, which slid to a nine-month low of 48.3, and the US Federal Reserve's hint at a withdrawal from its bond-buying stimulus next year combined to send the benchmark Shanghai stock index down by nearly 3 percent on Thursday.

The preliminary PMI, which is much lower than the May reading of 49.2, is in line with the recently released macroeconomic data that point to gloomy prospects for China's economy in the second quarter, if not for the whole year.

The money market has also felt the pinch from a weakening economy and dented confidence. Lending rates in the inter-bank market have soared this month and hit historical highs on Thursday.

Last year, China's year-on-year GDP growth dived to its lowest rate in 13 years, and if the current weak momentum continues, it could get worse.

Many international institutions, including the World Bank, have cut their forecasts for China's growth this year to around 7.5 percent.

However, such a low growth rate is satisfactory if policymakers stick to their reform-centered agenda and remain cautious about using a stimulus to boost the economy.

In fact policymakers are facing a challenge no less daunting than the one they faced during the global financial crisis. But so far they have remained calm and are clearly seeking a balance between short-term growth and longer-term sustainability.

Premier Li Keqiang was recently quoted by the media as saying that the current economic growth is within a reasonable range and the existing liquidity should be better used to support growth, indicating that the authorities will not rush to launch another round of stimulus measures.

The tolerance for slower growth, though not good news for the stock market, is necessary to prevent the world's second-largest economy from suffering more asset bubbles, financial risks and structural problems that menace both its short-term financial security and long-term growth sustainability.

The crux now is whether and to what extent the current economic difficulties will worsen and how determined policymakers remain in the face of the mounting pressure from a decelerating economy.