China bearing the brunt of crises in the US and the eurozone

BEIJING: China's manufacturing activity contracted in December while
foreign direct investment fell for the first time in 28 months, data
showed, as crises in the United States and Europe dragged on the
economy.
The bleak data came as the commerce ministry warned that
export-driven China would face a “very severe” foreign trade situation
in the first quarter of 2012 due to the “grim and complicated” global
economic outlook.
Mounting evidence that China is slowing will
ratchet up pressure on Beijing to further loosen monetary and fiscal
policies to prevent the world's second biggest economy from suffering a
painful hard landing.
The preliminary HSBC purchasing managers'
index reached 49 in December, slightly up from 47.7 in November - the
first contraction in 33 months - as consumers from New York to Paris cut
back on holiday spending due to deepening economic woes.
A reading above 50 indicates the sector is expanding while a reading below 50 suggests a contraction.
The final figure will be released on Dec 30.
“With
inflation quickly shifting to disinflation, the Chinese government can
and should make more aggressive easing on both fiscal and monetary
fronts to stabilise growth and jobs,” HSBC chief economist Qu Hongbin
said.
Qu also warned that “growth momentum remains weak, with
additional downside risks from exports and the property market not yet
fully filtering through.”
Other data showed China's foreign
direct investment in November fell 9.76% from a year earlier to
US$8.76bil, the first year-on-year decline for a single month since July
2009, the commerce ministry said.
China took US$103.77bil in the
January-November period, up 13.15% from a year earlier, but slower than
the 16% growth rate in the first 10 months, as US investment plunged
23.05%.
European investment rose an anaemic 0.29% to US$5.98bil, while investment from Asian countries soared 17.98% to US$89.59bil.
“The
foreign trade situation next year is still very unclear, but it will be
very severe in the first quarter due to the grim and complicated world
economic outlook,” said ministry spokesman Shen Danyang.
But
Chinese leaders on Wednesday vowed to maintain a “prudent monetary
policy and proactive fiscal policy” in 2012, suggesting they would move
cautiously to open credit valves.
Policymakers are anxious to
prevent a sharp slowdown in the economy but at the same time they want
to avoid reigniting inflation, which hit a more than three-year high of
6.5% in July and has the potential to trigger unrest. AFP