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Updated Monday, January 5, 2009 11:35 am TWN, By Li Yanping, Bloomberg



	China's manufacturing shrank for a third month as exports fell and companies ran down inventory, worsening the slowdown in the world's fourth-largest economy. Enlarge Photo

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China manufacturing shrinks for 3rd month

BEIJING -- China's manufacturing shrank for a third month as exports fell and companies ran down inventory, worsening the slowdown in the world's fourth-largest economy.

The Purchasing Managers' Index rose to a seasonally adjusted 41.2 in December from 38.8 in November, the China Federation of Logistics and Purchasing said Sunday in an e-mailed statement. A reading below 50 indicates output contracted.

China's growth may have slipped to 5.5 percent last quarter, the weakest pace in at least 15 years, as recessions in the U.S., Europe and Japan cut demand for exports, according to Shanghai- based Industrial Bank Co. The government has drawn up policies to support the steel and automobile industries through the slowdown, Premier Wen Jiabao said on Jan. 2.

"The December index shows China's economy continues to decline, but there are some signs of bottoming out," said Zhang Liqun, an economist at the State Council Development and Research Center. "As macroeconomic policies start to take effect, the pace of the slowdown will stabilize."

A measure of export orders rose to 30.7 from 29 in November. The output index jumped to 39.4 from 35.5. The new-order index rose to 37.3 from 32.3. November's levels were the lowest for each of those indexes since the survey began in 2005.

"Exports have only just started to shrink and it's going to get worse," said Wang Qian, an economist at JPMorgan Chase & Co. in Hong Kong.

Manufacturing shrank for a fifth month, according to a separate purchasing managers' index, released on Jan. 2 by CLSA Asia-Pacific Markets. A 4 trillion yuan (US$585 billion) economic stimulus package, announced by Wen in November, is yet to kick in.

Companies in industries from metals to toys are reducing production or closing down. Aluminum Corp. of China, the nation's biggest maker of the metal, cut output as prices fell.

"The government's planned investment may start to revive economic growth from the second quarter," Wang said.

Industrial profits grew at the slowest pace on record in November and car sales fell the most in more than three years. Overseas shipments fell in November for the first time in seven years and industrial output grew by the smallest margin in almost a decade.

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