Chinese manufacturing has tumbled for the better part of 2012, mainly due to rising wages and an increased effort made by U.S. businesses to bring their manufacturing back to American shores. This, along with several other factors has resulted in troubling economic conditions for the country. However, according to new reports, manufacturing in China may be slowly rebounding.
Recent articles in this blog have talked about the number of Chinese economists who are begging government officials to implement policies and regulations designed to spur economic recovery. Some regulatory measures have been made in the manufacturing sector, and it appears they are starting to produce some positive results.
According to financial institution HSBC, the Chinese purchasing managers' index (PMI) is expected to rise from 48.2 to 49.5 in July. If this number is reached, it will mark a five-month high, although the fact that it remains under the threshold of 50 shows that there is still much room for improvement.
Qu Hongbin, the head of HSBC's Asian research division, spoke to CNN about the numbers, expressing joy in the fact that the number is growing while insisting that it is still far too low.
"Earlier easing measures are starting to work," Hongbin said. "That said the below-50 July reading implied demand still remaining weak and employment under increasing pressure. This calls for more easing efforts to support growth and jobs."
More measures are expected to be taken, in an effort to speed up China's GDP growth rate. The country's gross domestic product grew at an annual rate of 7.6 in the first half of 2012, its slowest rate since 2009.
While some analysts are pleased with the increasing growth of China's manufacturing and are optimistic about the effects it can have on the country's overall economy, it's important to remember that positive reports aren't always reflected in similar market performance. Financial advisors and investors interested in related ETFs should examine the fundamentals of underlying stocks before investing.
Related ETFs
Global X China Financials (CHIX)
iShares FTSE/Xinha China 25 (FXI)
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