Chinese Manufacturing activity drops sharply in November

Chinese Manufacturing activity contracted sharply in November as the new order dropped steeply because of lower global and domestic demand. The provisional HSBC purchasing managers' index (PMI), an important parameter to judge the manufacturing activity dropped to 32-month low 48 in November from 51.4 in October. This is a provisional data and the correct PMI reading will be published later. Any PMI reading lower than 50 indicates contraction, while 48 signifies sharp drop in manufacturing activity.

China is an export economy and it exports most of its manufactured products to the developed nations. The demand for Chinese products dropped sharply in the western countries due to new currency bill passed by US and current euro zone debt crisis. The global economic uncertainty has affected its export as well which had registered its lowest growth in last one year during October. This lower PMI reading is just an outcome of lower global demand and lower export.

This lower reading increases possibility of economic and industrial slowdown in the World-s second largest economy. The Chinese industrial and GDP growth is expected to fall in the coming quarter due to the same reason. Due to lower manufacturing activity and increased fear of another slowdown, Chinese government can consider another set of fiscal stimulus and loose monetary policy for the struggling economy to boost economic activity.