Chinese factories hum, most see bright outlook

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Beijing, Dec 13: China’s already thrumming factories cranked up output further in the year to November on the back of booming exports, sustained investment growth and solid consumer spending.

The National Bureau of Statistics said annual growth in industrial output accelerated to 16.6% last month, beating market forecasts for a repeat of October’s 16.1% gain. “Robust industrial production growth is in line with our view that China’s growth momentum remains solid and will likely stay so in the near future,” economists at Goldman Sachs said in a note to clients. David Cohen with Action Economics in Singapore said he expected no let-up going into 2006 as Asia — and China in particular — reaped the fruits of strong global demand. “Exports remain strong, as does domestic demand, consistent with the undeniable momentum that continues in the Chinese manufacturing sector,” Cohen said of the output data.

He said the buoyancy of manufacturing, which is heavily skewed towards exports, would provide fresh ammunition for US policymakers who say July’s 2.1% revaluation of the yuan did not go far enough given China’s fast-growing productivity. “The rest of the world can argue that Beijing should allow some further currency appreciation because it’s not going to kill them,” Cohen commented. But other economists see signs of an economic slowdown that would weigh on industrial production next year.

“Overcapacity and falling profits will make companies bearish about the future and the sentiment will gradually affect their capital spending,” said Wang Chuanglian, an economist with Great Wall Fund Management in Shenzhen. Still, he said output growth was likely to remain above 15%, not least because of government efforts to boost consumption and so reduce the economy’s reliance on exports and related investment.

New data from the Organisation for Economic Co-operation and Development highlight China’s industrial prowess. The Paris-based club of rich nations calculates that China overtook the United States in 2004 as the world’s leading exporter of high-tech goods like laptop computers, mobile phones and digital cameras. China exported $180 billion worth of information and communication technology goods in 2004, compared with U.S. exports of $149 billion, the OECD said on Monday.

China’s rapid industrialisation, rooted in cheap labour and the embrace of modern, foreign technology, has been the main engine of development over the past quarter of a century.