Center

China manufacturing activity grows most in 2 years

(Bloomberg)
Updated: 2007-05-01 17:04

Manufacturing activity in China expanded at the fastest pace in more than two years in April, according to a survey of purchasing managers released today.

The Purchasing Managers' Index rose to 58.6 from 56.1 in March, the statistics bureau said in an e-mailed statement. That's the highest since the index started in January 2005.

The People's Bank of China has stepped up the pace of monetary tightening measures to curb lending and investment and cool growth in the world's fourth-largest economy. The central bank raised interest rates on March 18 and has ordered lenders to set aside more money as reserves four times this year.

"They're clearly sensitive to the potential for overheating," said David Cohen, an economist at Action Economics in Singapore. He expects a few more hikes in bank reserve requirements this year as well as higher interest rates and administrative measures to cool growth.

Economic growth accelerated to 11.1 percent in the first quarter, outpacing economists' estimates, on a trade surplus that almost doubled to $46.4 billion. Last year's 10.7 percent expansion was the fastest since 1995.

The People's Bank of China increased reserve requirements three times in 2006 and raised borrowing costs twice.

The April figure doesn't indicate economic growth will continue to accelerate, Zhang Liqun, a senior research fellow at the State Council's Development Research Center, said in today's e-mailed statement.

"Economic growth has stabilized and won't continue at the rate of the first quarter," Zhang said.