Interpreting economic figures

(China Daily)
Updated: 2010-09-02 09:10
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Keeping the economy on a steady course is one of the hardest things to do in China. It means neither running too fast nor applying the brakes, or even decelerating abruptly.

Viewed in this perspective, the Purchasing Managers' Index (PMI) in August, which the China Federation of Logistics and Purchasing released on Wednesday, can be considered the best possible result - considering the tough realities worldwide.

The figure can be taken as an indicator of growth when it goes above 50. It climbed to 51.7 in August from 51.2 in July, the lowest level since February last year and amid a three-month decline. Measuring only half a percentage point, the rebound is modest. The index can still clock additional gains from September to February 2011, when Spring Festival, the largest celebration in China, takes place.

But the broader picture will not change and there could be more fluctuations in the country's economic figures.

Overall, the economy is in a slow cycle, following a period of growth boosted heavily by government credit to mitigate the impact of the global financial crisis that started in 2008.

After expected results from the stimulus program, the main task now is to deflate the asset bubble, particularly in the urban housing market, and to avoid heavy inflation, which requires a gradual slowdown.

It will be a welcome feat for Beijing to successfully steer the economy forward within a range of small ups and downs, while its GDP growth remains within the world's leading pack.

The PMI is, as with the entire economy, still to a large extent tied to the manufacturing sector. Before the global market regains its momentum, Chinese managers will have no choice but continue working on weak demand from home and abroad.

There is a genuine likelihood that global market demand for Chinese manufactured goods can never be fully regained. A greater part of this economy will also have to find more customers in the domestic service sector. That will probably take a much longer, if not painful, process.

Till then, China will have to keep itself steady.