Economy

China's manufacturing expands at a slower pace

(Agencies)
Updated: 2010-07-01 10:48

Credit target

The government has told banks to set aside more money as reserves, targeted a 22 percent reduction in new lending from the record $1.4 trillion in 2009, and indicated that the yuan's peg to the dollar is over.

Lu Zhengwei, a Shanghai-based economist at Industrial Bank Co, said concern that an economic slowdown is possible may have damped purchasing managers' sentiment and higher labor costs may have altered hiring plans. [Chinese provinces to raise minimum wages]

Manufacturers including Honda Motor Co and Foxconn Technology Group have pushed up wages and at least nine Chinese provinces and cities will raise minimum wages from Thursday.

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The government has cracked down on property speculation by raising down-payment ratios and mortgage rates for multiple home buyers. Clamping down on local-government borrowing to contain risks from last year's explosion in debt could also limit growth. The finance ministry said it will scrap export rebates on some steel and metal products from July 15 to limit energy consumption and pollution.

"The biggest uncertainty in the outlook later this year may be how determined the government is in meeting its energy and pollution targets and in limiting related industries," said Lu.

Signs that China may be able to maintain momentum include a 49 percent jump in May exports from a year earlier and quickening growth in retail sales. Still, June or July trade data may start to show the effects of Europe's crisis, cabinet researcher Zhao Jinping said, according to a June 28 China Business News report. The statistics bureau is scheduled to release June and second-quarter data on July 15.