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News from China
PMI data points to recovery on rise in domestic demand
2nd October 2015

CHINA’S manufacturing and service activities in September appeared to have bottomed out in large state-owned enterprises but continued to weaken in private and export-oriented firms, according to surveys released yesterday.

The official Purchasing Managers’ Index, a comprehensive gauge of operating conditions in large state-owned industrial companies, landed at 49.8 last month after August’s 49.7, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.
A reading below 50 is contraction. The latest figure was the first rebound in three months, although still in negative territory.
The official non-manufacturing PMI, a gauge of conditions in the state-owned service sector, was 53.4 in September, the same as the previous month.
Zhao Qinghe, an analyst at the bureau, said the figures indicated stabilization in the economy thanks to slightly better domestic demand and easing policies.
“The data lent some optimism, and we expect more improvement with the supportive measures taking effect,” Zhao said.
The official PMI’s component indexes showed industrial production added 0.6 points from a month earlier to 52.3 in September, while new orders increased 0.5 points to 50.2. The components in the official non-manufacturing PMI also showed improvement in both production and demand, partly due to the arrival of the weeklong holiday to celebrate yesterday’s National Day.
However, the performance in private and export-oriented companies proved disappointing.
The Caixin China Manufacturing Purchasing Managers’ Index, a similar indicator slanted toward private and export-oriented companies, landed at 47.2 last month, down from August’s 47.3 to become the worst in six and a half years.
The figure has been below 50 for the seventh straight month after a brief rebound in February.
The Caixin Services Business Activity Index posted 50.1 in September, decelerating from 51.5 in August and signaled the slowest increase in the current 14-month sequence of expansion.
He Fan, chief economist at Caixin Insight Group, said the data indicated continued economic weakness, although the pressure driving the declines had eased.
“The industry has reached a critical stage in its structural transformation, and tepid demand is a main factor behind oversupply of manufacturing and why it has not recovered,” He said.
Earlier data showed that profits of China’s industrial companies fell more than expected in August, dropping 8.8 percent from a year earlier to 448.1 billion yuan (US$70.6 billion).
China’s economic performance surprised the market with a 7 percent increase in the second quarter.
But data in the past three months for trade, industrial production, retail sales and fixed-asset investment all showed little cause for optimism.

Liu Ligang, an economist at Australia & New Zealand Banking Group Co Ltd, said the readings suggested third-quarter gross domestic product may slow to as weak as 6.4 percent. “However, as monetary policy easing and expansionary fiscal policy gradually take effect, we expect GDP growth to modestly rebound to 6.8 percent in the fourth quarter, leading to a full-year growth of 6.8 percent,” Liu said.
Source: Shanghai Daily
China lowers deposit rates for 1st-time property buyers
1st October 2015

CHINA said yesterday it will cut the minimum downpayment for first-time home buyers in many cities, stepping up support for the sluggish property market and stumbling economy.
It was the second measure in two days to fire up consumption following a decision to halve the tax on the sale of small cars.

The central bank and banking regulator said they will lower the minimum downpayment for first-time home buyers to 25 percent, from 30 percent, in cities that do not have purchase restrictions.

The move aims to “support reasonable consumption of housing,” the People’s Bank of China and China Banking Regulatory

Commission said in a statement on the central bank’s website yesterday.

China’s property sector has hit a weak patch in the past year or so, with slowing sales leading to an overhang of unsold apartments and affecting demand for everything from steel to home appliances.

“The relaxed rule is helpful, but the impact will not be immediate because the main reason for high inventory in some cities is bad location and transportation,” said David Ji from Knight Frank.

“The rule will likely stimulate demand from buyers who are already observing,” he said.

The property sector accounts for 15 percent of China’s gross domestic product, so even modest signs of improvement would relieve some pressure on the economy.

Home prices rose for a fourth consecutive month in August as sales and market sentiment improved.

In a separate move yesterday, the housing ministry asked local governments to increase financial support to home buyers funding their purchases with housing provident funds.

Still, analysts don’t expect a full-blown turnaround in the property market any time soon, as the huge overhang of unsold homes discourages construction and investment in all but the biggest cities.

Haitong Securities said the move “shows the government’s intention to stabilize the property market. We expect favorable policies to be sustained until investment starts to recover.”

While home sales and prices have picked up in the past couple of months, annual growth in property investment in the first eight months of the year slowed to 3.5 percent, its lowest since early 2009.

The lower downpayment requirements will not apply in certain big cities such as Beijing, Shanghai and Shenzhen that have imposed restrictions on buying to prevent bubbles.

Source: Shanghai Daily
China sees slow increase in power use
30th September 2015

CHINA’S electricity consumption, an important indicator of economic activity, rose slowly in the first eight months of this year, suggesting economic headwinds, official data showed yesterday.
Power consumption rose 1 percent year on year to 3.68 trillion kilowatt-hours in the January-August period, the China Electricity Council said.
In the first eight months, electricity use by primary industry climbed 2.3 percent from a year earlier. Power consumption by secondary industry went down 0.7 percent, while tertiary industry posted a 7.5 percent increase amid economic restructuring.
Meanwhile, residential power consumption grew 4.3 percent year on year.
The decline in power usage in secondary industries indicated continued downward pressure on China’s industrial sector, said Shan Baoguo, with the State Grid Energy Research Institute.
He attributed the broader slowdown to sluggish external demand and a slowdown in exports, which dragged down industrial production.
The figures for August, in which power consumption increased 1.9 percent year on year to 512.4 billion kwh, provided a more encouraging suggestion of recovery.

Source: Shanghai Daily, 30 сентября, 2015
China sits at 14th for business environment
28th September 2015

 CHINA has been ranked 14th out of 60 leading economies based on an assessment of the business-growth environment, according to a survey by Grant Thornton.

The position, although a drop from third in 2013, is higher than some major developed countries, including France at 23rd and Britain at 27th, according to the global dynamism index compiled by the international accounting firm. Singapore was ranked first.

The assessment is based on five categories — science and technology; labor and human capital; economics and growth; business operating environment; and financing environment.

China maintained the lead in growth and was second in human capital. The high ranking was attributed to the robust consumption and service sector against the sluggish global recovery. Lackluster performance in the business and financing environment, however, dragged down the overall rank.

Source: Shanghai Daily, September 28, 2015

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