Business / Economy

Weaker manufacturing PMI may signal policy changes

By Jiang Xueqing (China Daily) Updated: 2014-03-25 07:16

Weaker manufacturing PMI may signal policy changes

A Chinese worker surveys the production of steel at a steel plant in Luoyang city, central Chinas Henan province, March 2, 2014. [Photo/icpress]

He noted that a huge amount of resources were allocated to real estate projects and local government financing platforms in the past few years, due to government-led economic intervention. Some investments brought only a small return and led to overcapacity in sectors like steel and cement.

Weaker manufacturing PMI may signal policy changes

Weaker manufacturing PMI may signal policy changes

"We can't reverse the situation overnight. The Chinese economy will inevitably slow down during its restructuring," Zhou said.

He expects that in order to prevent social conflicts, the government will try to halt an economic downturn by increasing investment, especially in domestic infrastructure projects.

As a result, fixed-asset investment growth may surpass 18 percent and even hit 20 percent in 2014, in his estimation.

Li Wei, China economist at Standard Chartered Bank, said China is still transforming from an industry-based economy to a service-driven one. In the process, its industries will undergo painful restructuring, and that will bring downward economic pressure.

"In the next two years, China's economic fluctuations are likely to become the norm. We'll see more interactions between economic growth and government policies," Li said.

The Chinese authorities already have taken measures to ensure stable economic growth by launching some projects in the country's 12th Five-Year Plan (2011-15).

Li predicted in the short term, the government will invest more in projects surrounding the service industry, emerging industries and infrastructure.

External economic conditions also will help lift the economy, he added.

"The Chinese economy will improve as the economies of the United States and the European Union recover in the second or third quarter," he said.

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