China manufacturing improved in July

BEIJING -- China's manufacturing expanded in July at its fastest rate in a year as domestic demand offset sluggish exports, a survey showed Monday, highlighting the importance of Beijing's huge stimulus in driving Chinese growth.

Hong Kong brokerage CLSA Asia-Pacific Markets said its monthly purchasing managers index, or PMI, rose to a 12-month high of 52.8 on a 100-point scale where numbers above 100 indicate an expansion. That was up from June's 51.8.

"Manufacturing activity continues to accelerate and, importantly, orders growth is being driven by the domestic economy," said CLSA economist Eric Fishwick in a statement. "Export prices lag, another sign of China looking inwards for growth."

The survey echoed a report Saturday by the state-sanctioned China Federation of Logistics & Purchasing that showed manufacturing expanding for a fifth month following the plunge in global demand for Chinese goods.

China's economic growth accelerated in the latest quarter to 7.9 percent over a year earlier, up from 6.1 percent the previous quarter, as Beijing's 4 trillion yuan ($586 billion) stimulus pumped money into the economy.

The biggest gains have been in construction and other areas targeted by Beijing's effort to pump up domestic demand with a massive program of building new highways and other public works. Consumer spending and other private sector activity are lagging.

The PMI is seen by economists as a better measure of China's economic outlook than data such as gross domestic product because it includes forward-looking elements such as orders for future sales. CLSA's index is based on a monthly survey of some 400 companies, while the Chinese federation surveys some 700 companies.

The World Bank raised its 2009 growth forecast for China in June from 6.5 percent to 7.2 percent due to the stimulus-driven investment boom. Private sector economists also have raised growth forecasts and say China is likely to be the first major economy to emerge from the world's worst downturn since the 1930s.

CLSA said its measure of manufacturing output rose to 54.6 from June's 53.7. The index of new orders rose to 55.9 from June's 54.6 even though the measure of export orders dropped to 50.2 from June's 50.9.

The employment indicator rose to 51.0 from June's 50.2, indicating that creation of new jobs was lagging.

"Demand for manufactured goods was reported to have centered on the domestic market," the CLSA report said, while the global slump "was still having a negative impact upon export sales."

As many as 30 million migrants were thrown out of work at export-driven factories when global demand collapsed last year. Some have found new jobs with stimulus-financed building projects but no comprehensive figures have been released.

___