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The Foundation for Future Stable Growth Needs to Be Further Consolidated

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Core Tip: But experts also pointed out that the foundation for future stable growth needs to be further consolidated. "Although the manufacturing PMI has stablized after it rose

But experts also pointed out that the foundation for future stable growth needs to be further consolidated.

"Although the manufacturing PMI has stablized after it rose for a fourth month, forces that drove up the index were not balanced and the foundation not solid enough, as sub-indices other than production were relatively weak," according to Zhao Qinghe.

The NBS sub-index for raw material inventories was 47.8 percent, dropping by 0.8 percentage points compared with last month and small businesses fell for a fourth month, both of which are still under 50 percent.

"The falling raw material inventory showed lukewarm market demand, and Chinese manufacturers remained cautious about future market prospects," said Liu Ligang, chief Greater China economist at ANZ Banking Group.

The sub-index for new orders dropped 0.2 percentage points to 52.3 percent, widening the gap to 2.2 percentage points with that of production, showing imbalanced supply and demand.

Meanwhile, the figures pointed to the hardship of small Chinese companies.

A breakdown by company size shows that PMI for large enterprises rose to 52.4 percent in November, PMI for medium-sized firms remained flat at 50.2 percent, while that for small manufacturers fell for the fourth month to 48.3 percent.

Although the recently released reform agenda boosted market sentiment, continued tight capital liquidity may dampen market confidence for further investment, Liu said.

Chang Jian, economist with Barclays, believed there will be a softening momentum for economic growth in the fourth quarter of the year, partly due to the drop of indices for new orders.

"Rather than bottoming out, we look for slower growth in the coming quarters," according to Chang.

She forecast economic growth to slow to 7.2 percent in 2014 from a possible 7.7 percent this year.

 
 
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