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China’s manufacturing activity up at fastest pace in over two years House prices fall accelerates in July

BEIJING, Aug 1, (AFP): Chinese manufacturing activity increased sharply in July, rising at its fastest pace in more than two years, an official survey showed Friday, as the world’s second-largest economy shows signs of increasing momentum. The official purchasing managers index (PMI) hit 51.7 last month, the National Bureau of Statistics said in a statement. The figure was up from 51.0 in June, and the best since 53.3 in April 2012. It was also above the median 51.4 forecast in a survey of nine economists by The Wall Street Journal. But the figures came after data showed price falls in China’s key property sector were accelerating.

“We are optimistic about China’s economic outlook in the remainder of this year, as the growth momentum is picking up while the inflation remains mild,” ANZ Bank economists Liu Li-Gang and Zhou Hao said in a note reacting to the PMI survey. The index tracks manufacturing activity in China’s factories and workshops and is a closely watched indicator of the health of the economy. A reading above 50 indicates growth, while anything below points to contraction.

Separately, British bank HSBC said its final PMI reading for July also came in at 51.7, up from 50.7 in June but weaker than the preliminary 52.0 announced last week. HSBC said it was an 18-month high.
Qu Hongbin, the bank’s chief China economist, said small revisions to several sub-indices brought the number down from the preliminary figure. Chinese authorities have since April introduced a series of measures to bolster growth, including tax breaks for small enterprises, concentrated infrastructure outlays, and incentives to encourage lending in rural areas and to small companies.
 
Growth
China’s economic growth accelerated to a higher-than-expected 7.5 percent in the second quarter, up from 7.4 percent in the previous three months, which was the worst since a similar 7.4 percent expansion in July-September 2012. The rebound helped relieve concerns that arose earlier this year when growth slowed in the first quarter to its slowest pace in 18 months, prompting authorities to introduce what economists have dubbed “mini-stimulus” measures. China in March set its annual growth target for this year at about 7.5 percent, the same as last year. The country’s leaders are trying to shift its economic model away from a historical over-reliance on large, state-supported investment to one where the country’s increasingly affluent consumers propel economic growth.
 
Meanwhile, China’s decline in property prices accelerated in July, an independent survey showed, adding to concerns over the sector, a key component of the world’s second-largest economy. The average price of a new home in 100 major cities was 10,835 yuan ($1,757) per square metre last month, down 0.81 percent from June, the China Index Academy (CIA) said. It was the third consecutive monthly decline and an acceleration from the falls of 0.50 percent in June and 0.32 percent in May, which was the first in nearly two years, according to CIA data. In July, prices dropped in 76 cities and rose in just 24, compared with 71 versus 29 in the previous month, it added.
 
All of China’s 10 biggest cities posted month-on-month falls, with the average price in Beijing dropping 1.6 percent to 32,736 yuan per square metre. “Pressured by high inventory levels and elevated debt ratios, most property developers adopted a price cut strategy to boost sales,” said CIA, the research unit of real estate website operator Soufun. “On the demand side, consumers still expected the market to continue to go down, leading to low buying desire.”
 
China has long sought to contain rising property prices, while also promising to increase the supply of affordable housing, as surging costs stoke discontent among ordinary citizens unable to afford new homes. Market control measures have included restrictions on purchases of second and third homes, higher minimum down-payments and taxes in some cities on multiple and non-locally owned homes. At the same time, local governments which make much of their income from land sales to developers have sought to find ways to loosen limits when property prices have fallen.

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