China economy 'growing at 9.5%'
(Reuters)
Updated: 2005-11-02 07:22

China is likely to post 9.5 percent economic growth for the second half of 2005, slowing to 8.5 to 9.0 percent in the full year of 2006, a senior government economist said on Tuesday.

"In the second half of this year 9.5 percent GDP growth is likely," said Liu Shijin, vice director of the Development Research Centre of the State Council, the cabinet.

Chinese workers work at a textile factory in Ningbo, East China's Zhejiang Province. [newsphoto/file]

"Next year GDP growth of 8.5 to 9 percent, I think, is very likely," he told a shipping forum in Shanghai.

In Beijing, investment bank CLSA said on Tuesday that its Purchasing Managers' Index for China fell to 50.1 in October from 50.9 in September, the lowest reading in the 19-month history of the survey and showing only marginal growth in manufacturing.

The index (CNPMIC-ECI) is designed to give a timely snapshot of China's manufacturing economy. A reading of the index above 50 indicates expansion while one below 50 shows contraction.

New orders, output and stocks of purchases rose slightly, but employment continued to fall and delivery times shortened, weighing on the index.

Eric Fishwick, CLSA's deputy chief economist, said the survey showed growth had all but petered out, giving the lie to the bullishness of official figures that showed third-quarter gross domestic product was up 9.4 percent on a year earlier.

"In reality the conditions facing Chinese manufacturers continue to deteriorate," Fishwick said. "Orders, from both China and overseas are slowing and, as manufacturers are having to keep tight control of product inventory, this is resulting in a sharp slowdown in production growth.

He said the profit environment was unfavorable, with input prices rising -- albeit at a reduced pace -- but output prices still falling. Employment was shrinking.

"In this environment Beijing will be looking for avenues to stimulate growth. Expect lower rates and a weaker renminbi during 2006," he said.

British research firm NTC polls more than 350 industrial firms for the survey. CLSA is the Hong Kong-based brokerage and investment banking arm of French Bank Credit Agricole.

The Chinese government recently began compiling its own PMI. This official index, released earlier on Tuesday, fell to 54.1 in October from 55.1 in September.