The office of the textile commissioner has recommended to the Centre to reduce excise duty on man made fibres (MMF) from 12 per cent to 6 per cent. The recommendations were made based on discussions with various export promotion councils and traders bodies some days ago, Textile Commissioner Kavita Gupta said, adding that yarns made of MMF like polyster and synthetic are in good demand. Addressing a meeting with Tirupur Exporters' Association at Tirupur near here, Gupta said it was for the government to decide on the reduction, according to sources. The official asked exporters to tap the huge potential in the technical textile sector, whose demand is increasing day by day across the globe, they said. She said that if garment manufacturers from Tirupur, whose exports have crossed Rs 20,000 crore, enter the technical textile sector, the revenue would increase manifold. The government has adequate funds to promote innovative products, she said and urged industrialists to come forward and utilise it for developing newer products.
SOURCE: The News Today Net
Extension of 2 per cent export benefit under Merchandise Export from India Scheme (MEIS) for more countries with immediate effect seemed a welcome relief to the textile industry, which industry associations say “is reeling under severe stress.” Explaining the significance of this amendment, M Senthilkumar, Chairman, The Southern India Mills’ Association (SIMA), said the 2 per cent export benefit under MEIS will henceforth be allowed for export of fabrics and manmade fibre spun yarns to African and West Asian countries, Sri Lanka and Bangladesh. Earlier, the benefit was confined only to countries in Group A, Japan in Group B and Sri Lanka in Group C for fabrics. In the case of manmade fibre spun yarn, the benefit was extended only to countries in Group A and Japan in Group B. Now the benefit has been extended to all countries in Group A, B and C for both fabrics and manmade fibre spun yarn.
Made-ups & garments
For made-ups and garments, the benefit was available to all countries in Group A, but only Japan in Group B. Now this has been extended to all countries in Group A and B. While hailing the announcement, the SIMA chief said cotton yarn could also have been included as the spinning sector is both capital and labour intensive and under more stress when compared to other segments. “However, the relief given to the manmade fibre spun yarn might help increase exports albeit slightly, which would in turn help the spinning sector. Terming it as a ‘Diwali gift’ , A Sakthivel, President, Tirupur Exporters’ Association, said this relief would help enhance the competitiveness of knitwear garment exports from India.
SOURCE: The Hindu Business Line
The textile industry has appealed to the Prime Minister to come out with policy measures that will enable the sector achieve its potential growth rate and have a major share in the global textile industry. Representatives of 20 textile industry associations participated in a meeting organised by Southern India Mills’ Association here on Monday with S. Gurumurthy, economist and corporate advisor. The participants submitted their suggestions that will help the textile and clothing sector achieve higher growth and also the support measures required from the government. According to a press release from the association, cotton textiles, textile and clothing and garment exports have declined in September too. The global trade is going through structural changes and this is having an impact on Indian exports. From fibre (cotton and manmade) to support for technology adoption, exports and interest rate reduction, the industry needed support in several areas. Mr. Gurumurthy urged the industry to be proactive and innovative. He said the industry should come out with proposals that will benefit the country, the society and the manufacturers. India’s co-operation with Bangladesh and Vietnam will benefit the textile sector, he said.
SOURCE: The Hindu
Facing pressures due to various reasons like global economic slowdown and Trans Pacific Partnership (TPP), of which India is not a part, the Indian textile and apparel industry is facing a lot of heat, due to which it is cutting down on the number of jobs. Job creation by the apparel and textile industry dropped by 70 per cent approximately in the quarter that ended in March 2015, as compared to December 2014 quarter, according to the 25th quarterly report on changes in employment. The handloom and powerloom industry recorded 3,000 jobs being cut during October to December 2014, and 2,000 during January to March 2015. In addition to job cutting, a lot of handloom and powerloom units witnessed close down or their capacities being slashed to half in the last few months, with Government policies like withdrawal of interest subvention and duty drawbacks adding to their grief.
Due to a lot of dependence on Chinese market for cotton and synthetic yarn export, yarn and fabric verticals are troubled dealing with excess stock and inventory pile-up, as China reduced imports from India. This too resulted in decline in capacity and hence adversely affecting job creation. “Government policy has not been targeted towards the textile industry. Through ‘Make in India’ initiative, production was expected to rise, but it has not been backed by policy from the Centre. With China reducing cotton yarn imports, rising inventory in the domestic textile sector has also led to a reduction in job creation. There has been an overall five to 10 per cent decline in capacity utilisation,” said O P Lohia, Chairman and Managing Director, Indo Rama Synthetics.
Poor rate of return on capital investment due to Central Government’s decision of taking back interest subvention of 3 per cent has limited the scope of expansion for the apparel exporters as they now have to bear an interest of 10 to 12 per cent on capital. “There are several factors that have hampered job growth in the industry, especially in the apparel sector. First, the industry has almost stopped expansion work. Second, the slowdown in exports has dampened outlook. And third, the domestic market, too, is not booming. There has been hardly seven to eight per cent growth in recent times and this rate of growth does not require any expansion to be made. This is why there is no expansion on the labour front as well,” said Rahul Mehta, President, Clothing Manufacturers’ Association of India (CMAI). The apparel industry still hopes to bounce back after November with increase in exports.
SOURCE: The CCF Group
The commerce department is firming up an export strategy focused on Africa, giving a new dimension to the government's strategic push for ties with the continent that could offer a large market for Indian goods at a time of slowing global demand. While India has offered a $10 billion credit line to Africa, the department has extended the benefits under the Merchandise Exports from India (MEIS) scheme to many goods headed for Africa to make the most of this credit. Senior government officials led by commerce minister Nirmala Sitharaman will next week apprise Parliament's consultative committee on plans to address India's continuously falling exports, with a focus on Africa and the country's neighbours. The meeting is to be in held in Goa on November 6-7. "Since the situation is not good globally, we have decided to focus on exports to Africa and our neighbouring countries. We can use our competitiveness in these markets to increase exports. We are working on an export strategy for next week's meeting," said a commerce department official, who did not wish to be named.
At the meeting the committee will also discuss Foreign Trade Policy (FTP) 2015-20 and its implications on exports, the official said. The steady decline in exports has triggered apprehensions that India may even miss last year's exports figure of $310.5 billion. Merchandise exports fell nearly a quarter in September, the tenth straight month of decline, raising worries that shipments may fall short of last year's levels. The Directorate General of Foreign Trade (DGFT) has included exports of textiles and ready-made garments including cotton fabrics, both woven and knitted, and made-ups to the African countries under the MEIS. The industry, which has been grappling with falling exports, has approved of this strategy. Following the revision, exports of value-added and labour intensive products such cotton dyed and printed fabrics, and made-ups, to African countries such as Mauritania, Mali, Niger, Benin, Angola, Senegal, Togo, Ghana, Kenya and Tanzania are expected to receive a huge boost. "This is a very positive step taken by the government and has come as a huge relief to the exporters of cotton textiles who are faced with declining exports," Texprocil chairman RK Dalmia said in a statement.
SOURCE: The Economic Times
India's merchandise exports fell by a little more than a quarter in September this year, marking the 10th consecutive monthly decline and raising serious questions about the government's plans to revive economic growth through a boost to manufacturing. Imports too fell by a similar margin over those in the same month last year - confirming that industrial demand at home continues to remain weak. Although the trade deficit decreased - down to $85 billion in the first half of 2015-16 compared to $97 billion in the same period last year, the government's policy makers are obviously not happy about these numbers. Last week's decision to offer a host of incentives for exporters is a reflection of that concern. Instead of acceding to the exporters' demand for announcing an interest subvention scheme, the government has focused on such export incentives that help exporting firms reduce their import costs and improve manufacturing competitiveness through lower duties.
The instrument used by the government to offer these incentives is the Merchandise Exports from India Scheme or MEIS that was announced early this year as part of the new five-year trade policy. The scheme already enables exporters of around 4,900 items to claim duty credit scrips determined at a rate of two to five per cent of their export earnings which they can use for paying a wide range of duties like customs and excise including service tax. The scrips' popularity among exporters is on the rise as these are transferable and units located in special economic zones are also eligible. The latest decision extends the coverage of MEIS to include 110 more items with export potential. The new export sectors to be covered under MEIS include sports goods, medical equipment, processed products of natural rubber, chemicals and plastics. In some items, the rate at which the duty credit scrips are valued has been raised. As a result, over 2,200 export products would get either higher MEIS rates or these incentives would now be available for exports to more countries. According to one estimate, the revised MEIS would now cover over 55 per cent of India's total exports.
The government will incur an additional cost of Rs 3,000 crore by way of foregone revenues, raising the total annual financial burden of MEIS on the exchequer to Rs 21,000 crore. The effectiveness of MEIS and its extension to new sectors, therefore, need to be properly evaluated. It has to be conceded that schemes such as MEIS will have a limited impact on growing exports or making that growth sustainable. At best, such measures are palliatives by nature and do not address the more fundamental weaknesses in India's exports sector. Sustainable export growth in a global environment where economic activity is slowing is a challenge that cannot be met by only such incentives. The government's policy makers must review the Indian manufacturing sector's competitiveness from the twin perspectives of the rupee's exchange rate and the current level of market access for Indian goods so that adequate policy responses can be framed. The Indian currency continues to be overvalued against the dollar even as India's competitors in the exports market do not enjoy a similar disadvantage. Adding to these constraints are recent developments, where international trade agreements by countries like the one concluded recently by 12 countries under the Trans-Pacific Partnership, accounting for 40 per cent of global income, will deny Indian exporters easy access to these markets. Both these factors are significant hurdles to India's exports and merely providing MEIS incentives can only make a marginal impact.
SOURCE: The Business Standard
Speaking at a function to mark the 15th statehood celebrations of Chhattisgarh, Union Finance Minister Arun Jaitley on Sunday said Indian economy was the fastest growing economy in the world. “The world is facing an economic crisis, and hence, India is also affected. Because of the crisis, prices of oil, petroleum, minerals and metals have fallen and due to this, countries producing these items have been affected,” he added. Jaitley, however, said the fall in petroleum prices had resulted in decline in inflation, effectively mean government spending less on subsidies. The Finance Minister said the government was pooling back these resources for infrastructure development.
Stating that a mineral producing state like Chhattisgarh has been affected by the economic slowdown, he suggested, “In order to face the challenge in future, the states will have to reduce the dependency on sectors like mineral resources and agriculture and focus on strengthening other sectors to expand the state’s economy.” Referring to the drought situation, Chief Minister Raman Singh said his government had decided to supply one quintal of paddy free of cost for sowing to 22 lakh farmers affected by drought during the next season. Besides, the government will also provide 1,500 units of free power to the farmers.
SOURCE: The Financial Express
Indian policy makers face a number of stiff challenges as they prepare for the 10th ministerial meet of the World Trade Organisation (WTO) to be held in Nairobi, Kenya during the middle of next month. The ministerial meet is the highest policy making body of the WTO covering 161 members. First, the news on trade front is nothing to cheer about. The September foreign trade data showed Indian exports declining for 10 straight months in row. The slowing Chinese economy is a significant factor impacting global demand and investment. Other countries, both emerging as well as developed ones are reckoning with the declining Chinese demand and not just for raw materials. The sad fact is emerging market countries as a group have become a drag on global trade. This is in sharp contrast to just a few years ago when they boosted global trade. It is not clear as to when and what measures will be necessary to reverse the trend.
A serious threat
A more ominous threat is to the orderly conduct of world trade. Less than two months before the Nairobi ministerial, the very relevance of the WTO and more specifically its Doha development round is once again being called into question. India might be wrongly accused of single-handedly blocking the trade facilitation agreement, which has been the only tangible success of the WTO’s Doha round so far. India’s persistence in seeking a simultaneous agreement on an extended food stocking might go well with certain domestic constituencies but has done nothing to dispel its image as a tough and often difficult negotiator.
Mega alignments
In days to come, Indian policy makers have to take cognisance of new trade blocs and alignments taking place. These may strike at the very structure of the WTO and more importantly the multilateral trading it embodies. The reference is to the emerging mega trade deals involving some, but not even a majority of WTO members. Referred to as plurilateral deals, to distinguish them from bilateral (two countries) or multilateral these are bound to alter the structure of world trade. Two important trade blocs are on the anvil — the Trans-pacific Partnership (TPP), which excludes India and Regional Comprehensive Economic Partnership (RCEP), which includes India and ten members of the ASEAN (Association of Southeast Asian Nations) plus Australia, China, Indonesia, Japan, South Korea and New Zealand.
Very recently, the U.S. concluded negotiations with 12 countries of the Pacific RIM to create what is called a Trans-Pacific Partnership (TPP). Although two major economic powers of the region — China and South Korea are not yet in, the TPP includes the U.S., Canada, Australia, New Zealand and Japan among the large economies and Chile, Peru, Mexico, Vietnam, Singapore, Brunei and Malaysia among the smaller economies. Together they account for 40 per cent of global trade. 800 million people live in these countries.
The TPP has not yet been voted into law. Even at this advanced stage it faces opposition within the U.S. as influential politicians stoke the fear of job losses at home in the wake of the mega agreement. But with the U.S. President backing it to the hilt, the TPP might soon become a reality. The TPP seeks to ease the flow of goods, services and investments among its members and to strengthen the rules on labour standards, environmental issues, origin criteria and intellectual property. Tariff reduction will hardly been an issue as much has been achieved already. For India, the TPP might signal the erosion of the competitive edge its goods and services enjoy especially in the traditional markets of European union and the U.S. India might also have to meet the challenge of a new rule bound trade architecture.
India must act proactively
The Commerce Ministry has urged Indian exporters to convert the imminent threats into opportunities. But that is going to be easier said than done. Policymakers should adopt a more give and take attitude in trade matters without compromising on India’s needs for food security. The emergence of plurilateral agreements is a warning that the world will simply pass by ignoring India’s interests. It has been reported that China will soon seek membership of the TPP, a move India should emulate, if possible at all.
Setting back multilateralism
At the global level, the TPP, the biggest trade pact in recent times, has been welcomed but with a few qualifications. The fine print of the agreement has not been released but those in the know of things say that it could boost the GDP of its members by one per cent by 2025, with the emerging markets among the signatories gaining more. The biggest loser is multilateral trade and its main sponsor the WTO which has been trying and largely failing to negotiate a deal since 2001. Regional deals are the next best thing, but by definition they exclude some countries and so might steer business away from efficient producers. The 10th ministerial of the WTO is bound to take note of the perils of plurilateral trade deals.
SOURCE: The Hindu
In the run up to the Resurgent Rajasthan Partnership Summit, agreements worth over Rs.1.5 trillion have been signed with companies from solar, mining, textiles and petroleum sectors, as the state gears up to become a major investment destination. Resurgent Rajasthan Partnership Summit 2015 is slated to be held in Jaipur on 19 and 20 November. “We have MoUs worth over Rs1.5 lakh crore. A major chunk of the investments promised under the agreements are in solar energy sector, apart from petroleum and mines,” Veenu Gupta, principal secretary, industries, government of Rajasthan said. “We have been able to attract major investments in the solar energy sector owing to our inherent climatic advantages,” she added. Asked about comparisons with Madhya Pradesh and Gujarat, who have been conducting similar investment summits, Gupta said Rajasthan was not competing with other states but only attempting to attract investments based on its potential. However, she said Rajasthan certainly aims to be in the top three when it comes to the ease of doing business parameters.
Besides, textiles is the only sector in the state which gets an interest subsidy on term loan taken from financial institutions. This is in addition to the interest subsidy offered by the government of India under technology upgradation fund (TUF) scheme. Combining these two subsidies, the effective interest rate in the textile sector in the state becomes negligible. Consequently, a large number of textile firms have set up plants in Rajasthan. The state has received investment proposals scaling up to Rs. u5,000 crore in the textile sector. These units on becoming operational will generate enough employment opportunities for 20,000 to 25,000 persons in the next two years.
SOURCE: The Live Mint
India is quietly assuming the mantle of fastest-growing major emerging-market economy, but it is too small on economic parameters to replace China as a new global growth locomotive, a new report says. According to global financial services firm BNP Paribas, the hope that India can replace China as a key locomotive of global demand is “misplaced”. China posted a 6.9 per cent GDP in the third quarter of this year to register its weakest growth since the 2009 global financial crisis. India is projected to grow faster than China in the near future.
As per Moody’s Analytics, India’s GDP grew in September quarter by 7.3 per cent, while for the full fiscal it would be 7.6 per cent. India’s GDP grew by 7.3 per cent in FY15. “Those hoping that a more buoyant India can effectively replace the ailing Chinese economy as a new global growth locomotive are likely to be disappointed, however, at least for the foreseeable future,” BNP Paribas said in a research note. “Although India is fast approaching China in terms of absolute population, its much lower living standards mean its economy is around five times smaller than China’s. At market prices, Chinese GDP was a little over USD 10 trillion in 2014, while India’s was just over USD 2 trillion,” it added. Moreover, the structure of Chinese and Indian economies are also very different.
India’s service sector is proportionately much larger than China’s, while its investment and industrial-production shares are much lower, it said. The report noted that infrastructure investment has surged to more than 20 per cent of Chinese GDP, but it is still in the single digits in India. Given the respective sizes of the two economies, China’s annual spending on infrastructure in USD terms is more than ten times India’s. The report further noted that Chinese commodity demand swamps India’s. India’s commodity demand has been about ten times smaller — it consumed around 80 million tons of steel in 2014 as against China’s 800 million tons. “Accordingly, while India may be slowly usurping China in terms of overall GDP and industrial production growth, it cannot realistically act as a meaningful offset to peaking Chinese demand for industrial commodities as its epic investment cycle inevitably flattens out,” the report noted. There can be little doubt that the Indian economy is increasingly on an upward arc and as the Chinese economy continues to slow, India is quietly assuming the mantle of fastest-growing major emerging-market economy, concerns about its revised national accounts notwithstanding, it said.
SOURCE: The Financial Express
IRS officer Bhushan Kumar Bansal has been appointed as the sixth member of the Central Board of Excise and Customs (CBEC), the apex body on indirect taxes, filling up the last vacancy on the board. Bansal, a 1981 batch Indian Revenue Service (Customs and Central Excise) officer, will have the rank of Special Secretary, an order issued by the Finance Ministry said. The post had fallen vacant after Najib Shah took over as CBEC Chairman. Bansal was hitherto Director General of National Academy of Customs, Excise and Narcotics (NACEN), Faridabad. Prior to that, he was Chief Commissioner of Delhi customs. The CBEC consists of a chairperson and a maximum of six members. Shah’s wife Neerja, V S Krishnan, Vanaja N Sarna, Ram Tirath, Ananya Ray and Bansal are the members in the board.
SOURCE: The Financial Express
All Pakistan Textile Mills Association (APTMA) Central Chairman Tariq Saud stated that the government’s decision of imposing regulatory duty of 10% on yarn and fabric is sensible and based on thorough facts. Around 40% capacity of spinning, weaving and processing mills has become impaired, closed and inoperative. In this situation, the government’s decision would play a crucial role in saving the textile industry of Pakistan to come out of the crisis, said Tariq. According to financial reports, the textile companies in spinning, weaving and composite units have suffered losses of around Rs 40 million on average, he said. He added that more than 27 basic textile mills have faced major losses while other mills are yet to conduct annual general meetings to disclose their losses. Despite the latest increase in the price of textile products due to an increase in the cotton index at the New York stock exchange, the textile mills are still suffering losses which are forcing the mills to shut down its operations, he said. Tariq said that the textile industry needs revival of the textile industry expeditiously before it affects the agriculture, made-ups and closing sector.
SOURCE: Yarns&Fibers
Local textile industry has been operating at below 30% of capacity in the first-half of the year owing to an influx of cheap imports, an industry official has said. Zimbabwe Textile Manufacturers’ Association (ZTMA) secretary-general Raymond Huni told NewsDay that the industry was still depressed at the moment as the government was yet to gazette Statutory Instruments (SIs) discouraging cheap imports of textile products into the country. “The textile industry has been operating at below 30% of capacity in the first half of the year. The government is in the process of gazetting the SIs enforcing the rebates introduced by the Finance minister (Patrick Chinamasa). We hope that the SI would be gazetted in two weeks’ time and it’s when we will start realising some changes,” he said. Huni said the sector knows that government has no money and this was the reason why it needed protection from cheap imports. He said some companies such as National Blankets who applied for the Distressed Marginalised Areas Fund have not yet received it. He welcomed the ban on second-hand clothes saying if implemented would see the sector double its contribution to Gross Domestic Product to 10%.
In his Mid-Term Fiscal Policy review, Chinamasa introduced the manufacturers’ rebate of duty on critical inputs imported by approved textile manufacturers. This rebate will cover spare parts, yarn and unbleached fabric, among others. Furthermore, it was proposed to remove blankets from the Open General Import Licence for a period of 24 months. Poly-knitted fabric is currently imported in semi-processed form, hence undergoes very limited local value addition before transformation into a blanket, which competes with locally manufactured blankets. To that effect, government will increase customs duty on poly knitted fabric from 10% to 40% plus $2, 50 per kg.Local textile industry is currently in distress with Bulawayo in particular which used to be a major textile centre having many companies either scaled down or closed. Some of the companies that have closed include True Value, Label Fashion, Suntosha Leisure Wear, Luncaster, Harren Manufacturing, Ascot, Belmor Fashions, Cinderella and Rusglen Fashions.
Recently, textile and clothing manufacturers cried foul over the alleged abuse of the Sadc and Common Market for Southern Africa (Comesa) trading certificates by countries outside the region. The associations said SADC and COMESA certificates were now being abused by outside countries. The textile sector requires at least $20 million to revive the industry currently reeling under low capitalisation levels and an influx of cheap imports. The $40 million Distressed Marginalised Areas Fund (Dimaf), which was created in 2010 to help companies retool, largely failed to turnaround the industry’s fortunes.
SOURCE: The News Day
As Indonesia struggles with a stubborn economic slowdown, President Joko Widodo wants his country to join the Trans Pacific Partnership (TPP). Having missed the TPP bus, Widodo wants to make up for lost time and kick start Indonesia's stuttering economy. According to one media report, the answer to whether Indonesia can join the TPP may not lie with yes or no, but with how ready Indonesia is for this and how to set up de-regulations or regulations in order to meet all standards set in the US-led trade pact. During a recent meeting with Barack Obama at the White House, Indonesian president Joko Widodo risked the ire of economic nationalists at home, declaring: “Indonesia intends to join the TPP.”
Ahead of his meeting with Obama, Widodo had said he would decide during his White House visit whether to join the trade pact, which includes neighboring Australia, Brunei, Malaysia, Singapore and Vietnam. But he has faced resistance from some officials in Indonesia, where the government has enacted regulations making it difficult for foreigners to work and adopted higher tariffs on imported items. Not everybody is as keen as Widodo. Indonesia for Global Justice (IGJ) is of the view that Indonesia might weaken its bargaining position if it takes part in the TPP as it will not have enough room for negotiations, an Indonesian news agency has reported. "Indonesia's bargaining power will become weak if it joins the TPP after the TPP is agreed upon by 12 countries," Research and Monitoring Manager at IGJ, Rachmi Hertanti, said in Jakarta. Such a weak bargaining position will result in Indonesia having no choice other than agreeing to the standards already set previously. She also reminded that the TPP will open access for foreign companies to the procurement of government goods and services, whose values could reach trillions of dollars set in the state budget. "This is a lucrative business for the US corporations. That is why the TPP applies non-discriminatory regulations and national treatment for foreign companies in this business activity," she said.
The TPP regulation covers extensive sectors and is comprehensive so the TPP has the potential to eliminate state sovereignty over the national economy that will be developed for the prosperity of the people. The IGJ reminded President Widodo that he should not be careless in deciding the extent of Indonesia's involvement in the TPP. Moreover, it is not the correct choice for Indonesia to join the pact in an effort to restore its national economy.
SOURCE: Fibre2fashion
China’s factory activity fell for an eighth straight month in October but at a slower pace as export orders flickered into life, a private survey showed on Monday, pointing to continued sluggishness in the world’s second-largest economy. The Caixin/Markit China Manufacturing Purchasing Managers’ Index(PMI) edged up to 48.3 in October from 47.2 in September. The highest reading since June 2015 will likely fuel hopes that the industry’s long slump may be bottoming out. But it remained well below the 50 mark, signifying a further contraction that will raise doubts about whether China’s economy could see a modest pick-up in the fourth quarter.
Taken together with official factory and services sector surveys released on Sunday, the readings reinforced most economists’ views that business conditions in China are continuing to cool at a gradual albeit uneven rate, with no signs of a hard landing which recently spooked global investors. Suggesting some improvement in soft global demand, the Caixin survey showed new export orders expanded for the first time since June, albeit marginally. The sub-index rose to 50.7 from 44.6 in September. Demand at home remained sluggish, however. The overall new orders sub-index, which covers domestic and export orders, shrank for the fourth month in a row in October, though the contraction was more modest than in September. “The slight upswing shows the manufacturing industry’s overall weakening has slowed down, indicating that previous stimulus measures have begun to take effect,” said He Fan, Chief Economist at Caixin Insight Group.
Manufacturers shed jobs for the 24th straight month on weakening sales, but again the rate of reduction was the weakest in three months. China’s official factory survey released on Sunday showed activity unexpectedly shrank for a third straight month, though the contraction was modest. The NBS survey pointed to weaker export orders and further layoffs. The private survey focuses on small and mid-sized companies, which are facing greater strains from the economic slowdown, while the official gauge looks more at larger, state firms.
MORE POLICY SUPPORT EXPECTED
“The data reinforce our view that the last PBOC interest rate cut (announced on Oct 23) was to preempt weak October activity data,” ING economists said in a note. “In addition to setting global investor sentiment to risk-off, we think they will raise the consensus forecast for PBOC rate cuts.” Beijing has rolled out a flurry of support steps since last year to avert a sharper slowdown, including slashing interest rates six times since November. But such measures have been slower to take effect than in the past, and economists remain wary about the outlook. “Weak aggregate demand remained the biggest obstacle to economic growth, and the risk of deflation resulting from the continued fall in the prices of bulk commodities needs attention,” said He.
China’s economy grew 6.9 percent between July and September from a year earlier, dipping below 7 percent for the first time since the global financial crisis, though some market watchers believe real growth levels are much lower than official data suggest. Weighed down by a property downturn, weak exports, factory overcapacity and high levels of local debt, growth is expected to slow to a quarter-century low of around 7 percent this year. Many economists have expected that economic growth would bottom out in the third quarter, with a modest improvement late this year and into early 2016 as additional stimulus measures gradually take effect.
SOURCE: The Financial Express
