China Economic Scan Weekly Economic Review

Last week in the Chinese economy, aside from the visitby US Treasury Secretary Timothy Geithner, there were a few interestingeconomic developments.

Last week in the Chinese economy, aside from the visitby US Treasury Secretary Timothy Geithner, there were a few interestingeconomic developments. Among data releases were the official PMI, andindustrial profits, there were also inflation forecasts and statements fromgovernment bodies.

 

The official Purchasing Manager’s Index (PMI) was at aseasonally adjusted 53.1 in May after registering 53.5 in April, the Federationof Logistics and Purchasing said. A reading of the PMI above 50 indicatesan expansion.

 

Chinese industrial profits in the first 4 months in 22provinces fell 27.9% from a year earlier, narrowing a drop seen in Q1, theNational Bureau of Statistics (NBS) said. In April, 23 out of 39 sectors sawtheir profit growth rebound or their losses narrow, the NBS said in a statementon its website (www.stats.gov.cn).

 

China’s banking regulator and the Finance Ministry warnedbanks against issuing risky loans, saying they must step up their riskmanagement. Banks extended 5.17 trillion yuan ($757.2 billion) in loans in thefirst 4 months of 2008, exceeding the government’s minimum target of 5 trillionyuan for all of 2009 and fanning fears that banks are taking undue creditrisks.

 

A Bank of Communications report said China’s CPI islikely to set a fourth consecutive drop in May and to remain negative in thefirst half of 2009. BoCom expects food prices to drop slightly in May. Thereport indicated a range of –1.8% to –1.2%, based on data from the Ministry ofAgriculture and Ministry of Commerce.

 

The Chinese Ministry of Commerce said it would seek toactively encourage foreign investment in China, China’s actual foreign directinvestment fell 22.5% on year in April to $5.89 billion, bringing actual FDI inthe first 4 months of this year to $27.67 billion, down 21% from a year earlier.

 

There were roughly 666,000 foreign-invested companies inChina as of end April. These foreign-invested firms contributed to 29.7% ofChina’s overall industrial output in 2008.

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