Power of Attorney for China

China News | China Apostille | Surging Domestic Demand China

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LONDON | BEIJING: Surging domestic demand helped manufacturing growth in China and Russia pick up speed in August, according to business surveys on Wednesday that conversely showed a slowing recovery in European factories. Purchasing managers indexes, which measure changes in business activity across thousands of private sector companies, showed diverging fortunes among euro zone manufacturers which expanded overall at their slowest pace since February.

The Markit Eurozone Manufacturing PMI for August dropped to 55.1 from 56.7 in July, marking its 11th month above the 50.0 mark that divides growth from contraction.

Manufacturing growth in Germany slowed in August although other recent data show Europe’s biggest economy is expanding fast. Business in France accelerated but Italy and Spain saw their manufacturing indexes slip backwards. “We are at a delicate juncture of the global business cycle. Globally there is a slowdown in the trade cycle which first affects the economies which are reliant on that,” said Silvio Peruzzo at RBS. “Just as they were benefitting from the acceleration in Q4 2009 and Q1 2010, they will now be subject to the downturn and this will amplify the divergence we are seeing.”

Britain, a major euro zone trading partner, saw growth in its manufacturing sector slow more than expected last month, led by the weakest expansion in new orders for more than a year.

In contrast, a pair of China’s manufacturing surveys showed activity picked up last month, recovering from a government-engineered slowdown designed to calm an overheating economy.

Indian factories expanded apace in August, although slightly slower than in July, after Asia’s third-largest economy grew at its fastest rate in nearly three years in the last quarter.

And the manufacturing sector of Russia — part of the BRIC quartet of new economic powers alongside China, India and Brazil — expanded at its fastest rate in 28 months largely thanks to the strong domestic demand.

HSBC’s purchasing managers’ index for China rose to a three-month high of 51.9 in August from 49.4 in July, while the official index also rose, to 51.7 from 51.2. Optimism that Beijing was succeeding in shifting towards more domestic-driven and sustained growth helped lift Asian stocks and metals markets.

However, fears that recovery in the US was petering out and could stall the global upturn have haunted markets, pushing the global stock index down more than 3% last month.

“We expect China will have a relatively moderate slowdown over the second half of 2010, but weaker external demand from the US and Europe still represent a significant downside risk,” said Brian Jackson of Royal Bank of Canada in Hong Kong. China’s growing influence showed up in Australia which grew 1.2% in the second quarter, beating forecasts largely due to China’s and India’s voracious appetite for Australia’s resources, from coal to wheat.