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POLITICAL ECONOMY
China manufacturing expands for third straight month: govt
By Benjamin CARLSON
Beijing (AFP) June 1, 2016


China new home prices grow at fastest rate in two years
Beijing (AFP) June 1, 2016 - New home prices in China grew at their fastest pace in more than two years in May, a private survey showed, signalling the recovery of a crucial sector in the world's second-largest economy.

After fuelling much of China's spectacular growth in recent decades the property market has been in the doldrums for the last two years, with new buyers priced out despite government borrowing restrictions reining in soaring costs.

Beijing has introduced several policies to try and stabilise the market, including lowering the minimum down payment requirement, cutting transaction taxes and providing incentives for migrant workers to buy homes.

According to the China Index Academy (CIA), the research unit of real estate website operator Soufun, new apartment prices in 100 major Chinese cities rose 1.7 percent since April and were up 10.34 percent year on year -- their fastest growth in 27 months.

Soufun provides price information for new and second-hand homes across China.

It said the average price was 11,662 yuan ($1,770) per square metre.

China's economy grew only 6.9 percent in 2015, its weakest rate in a quarter of a century, and concerns about its slowdown have roiled global markets.

The real estate market is a key driver of growth but the country has a huge inventory of unsold new homes.

At a policy conference in December, authorities pledged to encourage developers to "moderately cut housing prices".

They also promised to reform the household registration system to provide equal access to social benefits such as pensions and education so as to boost the appeal of city homes to migrant workers.

This year the government also cut minimum down payments for first homes in most cities to 20 percent, an all-time low.

Activity in Chinese factories expanded for the third straight month in May, official data showed, a further sign of stabilisation in the world's second largest economy after a period of slow growth.

The official Purchasing Manager's Index (PMI), which tracks activities in the country's factories and workshops, came in at 50.1 on Wednesday, according to the National Bureau of Statistics (NBS).

Any reading above 50 signals expanding activity, while anything below indicates shrinkage.

The figure was unchanged from April and just below the March figure of 50.2, but beat economists' median expectations of 50 in a survey by Bloomberg News.

Investors watch the figure closely as the first available indicator each month of the health of the world's second biggest economy.

China's economy is a vital driver of global expansion. But it grew only 6.9 percent last year, its weakest rate in a quarter of a century.

The key manufacturing sector has been struggling for months in the face of sagging global demand for Chinese products.

Analysts with ANZ Research said the results were lifted by property investment and fiscal policies and ruled out any imminent "broad-based monetary policy easing" as China's leaders "do not welcome property-led growth" in the first quarter.

Real estate spending can boost manufacturing by increasing demand for furniture, appliances and household goods.

A recent private survey showed that new home prices rose at their fastest pace in more than two years in May, surging more than 10 percent year on year.

"What is worth paying attention to is that the growth rate of raw material prices declined, showing that market demand remained rather weak and the foundation for manufacturing growth is still unstable," NBS analyst Zhao Qinghe said in a statement, referring to the May figure.

China's economy is "operating steadily" now but is "lacking any upward momentum", Tao Dong of Credit Suisse told Bloomberg News, adding that the economy "will wane again in the summer", which will be a "key test" for the central bank to keep policies stable.

- Elusive rebound -

The signs were less positive from the private Caixin Purchasing Managers' Index, which puts a greater emphasis on smaller firms.

That figure came in at 49.2, meeting economists' expectations of a fractional decline from 49.4 in April, the Chinese financial magazine said in a joint statement with data compiler Markit.

Manufacturers continued to shed jobs as weak demand and a drop in new orders weighed on the figures, it said.

"Overall, China's economy has not been able to sustain the recovery it had in the first quarter and is in the process of bottoming out," Zhao Zhengsheng, director of Macro economic Analysis at CEBM Group said.

"The government still needs to make full use of proactive fiscal policy measures accompanied by a prudent monetary policy to prevent the economy from slowing further."

While Beijing policies have managed to keep growth stable, a "significant rebound is proving elusive", Julian Evans-Pritchard of Capital Economics said, adding that it has become likelier that "growth could merely hold steady this year".

Investors were unimpressed with the figures as stocks edged down slightly on Wednesday, with the benchmark Shanghai Composite Index closing down 0.11 percent.


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