August 7, 2020

Manufacturing Data Points to an Economy Gaining Speed

The Institute for Supply Management, a trade group of purchasing managers, said Tuesday that its manufacturing index rose to 55.7 in August from 55.4 in July. That was higher than the index’s 12-month average of 52. A reading above 50 indicates growth.

A gauge of new orders rose nearly five points to 63.2, the highest level in more than two years. However, production increased more slowly than in July, and factories added jobs at a weaker rate. Despite the drop, production reached its highest level in two-and-a-half years.

The overall improvement contrasted with other recent reports that had pointed to a slowdown in manufacturing. The institute’s survey found broad-based growth, with 15 out of 18 industries reporting expansion and only one reporting contraction. That suggested that factory production could accelerate.

“The data unambiguously point to a pickup,” Jim O’Sullivan, an economist at High Frequency Economics, said in a note to clients.

The Federal Reserve will closely examine the report, released two weeks before Fed policy makers will decide whether to slow their bond-buying program. The Fed chairman, Ben S. Bernanke, has said the central bank would scale back its purchases this year if the economy continued to strengthen. The monthly bond purchases worth $85 billion have been intended to keep interest rates low.

The jobs report for August, to be released Friday, is the most important remaining economic report the Fed will consider.

Orders from overseas also rose, a sign that improving economies in Europe and China may be bolstering American manufacturers. The economies of the 17 countries in the European Union that use the euro grew in the April-June quarter after six quarters of recession.

And a private survey of purchasing managers in China found that manufacturing in that country expanded after shrinking for the three previous months.

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Rise of Inflation Eases in Britain

LONDON — Consumer prices in Britain increased at a slower rate in July after hitting a 14-month high in June, relieving some pressure on households but remaining well above the central bank’s inflation target.

Inflation slowed to 2.8 percent in July from 2.9 percent in June, partly because clothing stores discounted prices and airfares were lower, the Office for National Statistics said Tuesday. A slowdown in consumer price increases would help households, which have been squeezed by more expensive utility costs and other living expenses just as many employees saw their salaries cut or frozen.

The Bank of England, which has its own inflation target of 2 percent, has been predicting that consumer price increases would remain at the current level before starting to ease toward the end of this year. But some economists warned that higher oil prices and a strengthening housing market might help to push prices up much further in the short-term.

Howard Archer, an economist at IHS Global Insight, wrote in a note to clients that consumer price inflation “might touch 3 percent in the near term, but it should start heading gradually down towards the end of the year.” He added, “Much will clearly depend on oil price developments.”

Britain’s economy has started to show signs of recovery after narrowly avoiding a triple-dip recession at the beginning of this year. Consumer confidence has been improving and the construction and manufacturing industries have returned to growth. The values of houses have been increasing, not just in London but across the country.

Still, the Bank of England’s new governor, Mark J. Carney, warned last week that the recovery would be very slow and that headwinds persisted. To help speed up the recovery, Mr. Carney linked future decisions on interest rates, which are currently at a record low of 0.5 percent, to unemployment. He said that the Bank of England planned to keep interest rates unchanged until unemployment falls to 7 percent from 7.8 percent at the moment.

The plan, which is similar to steps taken by the United States Federal Reserve, is expected to eliminate some uncertainty for consumers and companies about the future cost of borrowing. But Mr. Carney also said the central bank was sticking to its main mandate of bringing down consumer price inflation. Unlike most of its neighbors, Britain continues to be plagued by relatively high inflation that is linked to several factors, including oil and gas prices.

Cathy Jamieson, a member of Parliament for the opposition Labour Party, said that despite the slowdown in inflation in July, “prices continue to rise faster than wages as the Tory-led government’s cost of living crisis continues.”

Some lawmakers and economists have started to warn that recent increases in the prices of homes could make them even more unaffordable for many. In a separate report Tuesday, the statistical office said house-price inflation rose annually to 3.1 percent in June compared to 2.9 percent in May, bringing prices to the highest level in five years.

The values of homes rose fastest in London, an 8.1 percent increase, helped by buyers from Asia and Europe looking for a haven for their investments.

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I.M.F. Trims Global Forecast as Emerging Markets Lag

WASHINGTON — Many major emerging economies have weakened since the spring, the International Monetary Fund said on Tuesday in the latest update to its economic forecasts, while advanced economies, including the United States and Europe, continue to trudge along with subpar growth and the euro area remains mired in recession.

The fund now expects the global economy to grow about 3.1 percent in 2013, the same rate as in 2012 and down from growth of 3.9 percent in 2011. That is 0.2 percentage points lower than the Washington-based fund forecast in April.

Olivier Blanchard, the fund’s chief economist, said in the periodic update that emerging economies were experiencing a “slowdown in underlying growth,” and the fund lowered its forecasts for China, India, Brazil, Mexico, South Africa and Russia, among other countries. “It’s clear that these countries are not going to grow at the same rate as they did before the crisis,” he said.

Given that emerging economies have in no small part powered the global recovery, their slowdown has a significant effect on the rest of the world, the fund said. For instance, Mr. Blanchard said, if growth in the so-called BRICS — Brazil, Russia, India, China and South Africa — were 2 percentage points slower than expected, a half-percentage point would be knocked off the United States’ growth rate. “It matters,” he said.

The fund said that the recession in the euro area had proved deeper than expected in recent months because of the persistent combination of tight credit conditions, low demand and government budget cutting. Next year, the fund’s forecasters expect growth to pick up in the 17 countries of the euro zone, but to a slower rate than previously thought — just 0.9 percent, down from about 1 percent as forecast in April.

The fund warned, as it has before, that the United States’ tax and spending policies were slowing its recovery. Private demand is improving as the turnaround in the housing market helps to repair households’ balance sheets and as the Federal Reserve continues its campaign to encourage investors to invest with accommodative monetary policy, the fund said. But tax increases and budget cuts were weighing on growth, it warned.

The fund cut its estimate of United States growth by 0.2 percentage points for both 2013 and 2014. It now sees the country’s economy growing 1.7 percent this year and 2.7 percent next year.

Japan is one bright spot in the global economy, the I.M.F. said. The country has been mired in stagnation and deflation for a decade. But since the beginning of the year, the government has been engaged in an athletic effort to spur the economy with aggressive asset purchases by the central bank and a jolt of government spending. The I.M.F. raised its estimate of the country’s current-year growth to 2 percent, up 0.5 percentage points from its April forecast.

Among emerging economies, different countries were suffering from different problems, the fund said. In some cases, infrastructure bottlenecks and other capacity constraints were stifling economic activity. In other cases, among big exporters like Russia, lower commodity prices were hurting growth.

Demand is weakening for goods from countries like Nigeria and South Africa, weighing down the whole sub-Saharan region, the fund said. And countries in the Middle East and North Africa continue to see disruptive political transitions, including violent ones.

The prospect of the Federal Reserve tapering its extraordinary asset-buying program — essentially taking its foot off the accelerator, if not putting it on the brakes — is sending shudders through the global economy, too. Financial markets have become more volatile and yields have increased in part because of uncertainty about the Fed’s policies, the fund said.

The rising yields “largely reflect a one-time repricing of risk,” it said. “However, if underlying vulnerabilities lead to additional portfolio shifts, further yield increases and continued higher volatility, the result could be sustained capital flow reversals and lower growth in emerging economies.”

The World Bank, the I.M.F.’s sister institution, has noted that businesses and governments in many lower-income developing economies have engaged in huge infrastructure projects financed with rates pushed down by the Fed. As interest rates rise, it has warned, some of those projects might fail — revealing financial bubbles and causing economic turbulence in the coming months.

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Economic View: Emerging Markets, Hitting a Wall

A GROWTH slowdown in the so-called BRICS nations — Brazil, Russia, India, China and South Africa — could be impeding the expansion of the global economy. That’s serious enough, and indeed we are seeing unrest in Brazil over stagnant living standards. Yet a graver problem may be lurking behind the headlines — namely, that sustained, meteoric growth in emerging economies may no longer be possible.

The disconcerting truth is that the great “age of industrialization” may be behind us, a possibility that has been outlined most forcefully by the economist Dani Rodrik, who is leaving Harvard for Princeton next month. And evidence for this view is coming from at least four directions:

THE RISE OF AUTOMATION First, machines can perform more and more functions in manufacturing, and sometimes even in services. That makes it harder to compete via low wages.

Say you run a company in a developed nation and have been automating many of its processes. Because your total bill for employee wages would be low, why not choose the proximity and familiarity of investing in labor in or near your home country? This change would help the jobs picture in the United States and probably countries like Mexico, but could hurt many other lower-wage nations.

GLOBAL SUPPLY SOURCES Supply chains are now scattered across many countries. Think of the old development model as a nation, such as South Korea, trying to build a nearly complete domestic supply chain for its automobile and other industries. The newer model is more distributed, as reflected by the iPhone, with the bounty from the investment spread across many locations, including the Philippines, Taiwan and mainland China. As for cars, Thailand has courted automobile factories with success, but the parts usually come from outside the country and the benefits for the Thai economy are limited.

Richard Baldwin, professor of international economics at the Graduate Institute in Geneva, refers to the internationalization of the supply chain as “globalization’s second unbundling.” He sees the new world as one of “development enclaves,” in which parts of countries will stand out as advanced or wealthy, without fundamentally transforming the entire economy.

WIDER ECONOMIC GAPS Another barrier is the difficulty of sustaining a cultural vision for catching up economically. South Korea was a poor nation in the 1960s, and its economic rise required sacrifices from millions of people in work hours, savings and investment in education. But within 20 years or so, one could see that South Korea would most likely join the ranks of economically developed nations. Indeed it has, so these sacrifices yielded satisfaction within a reasonable time. Many of today’s poorer nations seem to be more than 20 years away from competing with the global leaders, which are now themselves more advanced, and that slower and longer path to the top may discourage some countries from even trying.

AGING POPULATIONS Finally, many lower-income countries will be old before they are rich. China’s population, for example, is aging rapidly, given the government’s one-child policy and the decline in birthrates that accompanies rising income. It is less well known that fertility rates in much of the Middle East and North Africa are also falling rapidly. In Iran, for example, it is now estimated at 1.86 per woman, which over time would mean that families are not replenishing themselves. And shrinking and older populations, of course, limit future economic growth.

BY no means do these arguments mean that the living standards of poorer nations must stagnate. A country can improve the lot of at least some of its citizens by selling services, as seen in the relative prosperity of Bangalore, India, which, among other activities, runs call centers and sells many programming services online. Many African nations are marketing their resource wealth, and may also improve productivity in local agriculture. Virtually all poor nations eventually benefit from the innovations of wealthy nations, which they often receive at much lower prices, as seen with cellphones and medications, for example.

So the chances for progress remain, but those poorer nations might never “become like us.” There was something special about the 20th-century mix of widespread, well-paying manufacturing jobs, which enabled the rise of a middle class that would take significant control of government, through its roles as voters and taxpayers. Those manufacturing jobs also created strong incentives for many people to pursue traditional education, whether in Toronto or Tokyo.

The best guess is that the idea of economic catch-up has changed, which means that politics in developing nations could change, too. Just as inequality in income and wealth has been rising in the United States, newly growing nations find themselves in a more stratified world, without developing their own strong egalitarian histories to undergird political institutions or economic expectations. Many of the wealthy may produce their public goods — like secure streets and clean, beautiful parks — in gated communities.

In some countries, there may be a de facto “rule by consent” from abroad — if, for instance, you are an African working in a Chinese-owned mine and living in a company town, while receiving your vaccines from a Western nonprofit organization. Those phenomena might not fit our current notions of national pride very well — and might mean further splits within developing nations.

Indeed, the future path of developing countries could be much different from that of recent, high-growth success stories. The next set of emerging-market winners, for example, may retain very large pockets of poverty. And as the expectation of a single, common path for economic development fades, governments may need to rethink what they can accomplish — and how.

In any case, we should be prepared for the possibility that, while Seoul now looks a fair amount like Los Angeles, perhaps La Paz, Accra and Dhaka will never look much like Seoul.

Tyler Cowen is a professor of economics at George Mason University.

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China’s Export Growth Slows Amid Concern of Slowdown

HONG KONG — Chinese exports showed only modest growth in May, rising just 1 percent, officials said Saturday, an increase that was much lower than analysts’ expectations.

The 1 percent increase compared with a 14.7 percent rise in April, when the export figures were believed to have been artificially inflated. Before Saturday’s figure came out, analysts had been expecting Chinese exports to rise at least 7 percent in May.

The slowing of export growth comes as concern is rising about the slowing Chinese economy and tightening liquidity. The European Union, China’s biggest trading partner, remains mired in a stubborn economic downturn, while in the United States, China’s next-largest export market, the Federal Reserve has recently been sending signals it may start curtailing its stimulative monetary policies.

China’s May trade figures showed it had a trade surplus of $20.4 billion for the month, up from $19.3 billion, as imports declined 0.3 percent, the Customs Administration said. The drop in imports – however slight – was a possible sign of the weakness of the domestic economy.

The trade figures come as Chinese stocks last week saw their first weekly decline in six weeks amid signs of tightening liquidity within China. A clearer picture of the Chinese economy is expected to come Sunday, when the government releases data on retail sales, industrial output and inflation.

Economists had expected this month’s figures to show a slowdown as the government has begun a campaign to prevent companies from overstating their exports. Many businesses are believed to have done so in March and April as a way to bypass currency controls and bring more money into the country, so as to speculate on further appreciation of China’s renminbi.

The main evidence for such strategies lay in official statistics showing soaring exports to Hong Kong and to bonded export zones on the mainland itself, even as re-exports to the rest of the world from these places remained weak.

Louis Kuijs, an economist in the Hong Kong office of the Royal Bank of Scotland, had estimated in May that more than half of the officially reported growth of 14.7 percent in April from a year earlier was actually the result of companies’ manipulating their statistics so as to place bets on the Chinese currency. The true rate of export growth in April, eliminating the effects of these strategies, was more like 5.7 percent.

The dramatic slowdown in export growth in May “in part reflects the impact of a clamp down by the government on firms dressing up financial inflows as exports,” Mr. Kuijs said in an e-mail on Saturday.

Chinese customs data compiled by CEIC Data in Hong Kong showed that the mainland’s exports to Hong Kong were only up 7.7 percent in May from a year earlier. In April, they had been up 57.2 percent from the same month last year, and in March they had been up 92.9 percent.

Changing expectations about China’s currency – fewer business people now expect further appreciation – may have also reduced the incentive for companies to overstate exports, Mr. Kuijs said.

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DealBook: Subscribers Fear Bloomberg Is Becoming Their Rival

The Bloomberg desktop terminals contain a vast store of financial and market information.Brendan McDermid/ReutersThe Bloomberg desktop terminals contain a vast store of financial and market information.

Long thought of as a company that serves the needs of Wall Street firms, Bloomberg L.P. is quietly becoming more like them, moving recently into businesses that have been the domain of the largest banks.

This relatively unheralded expansion by Bloomberg helps explain Wall Street’s consternation at recent disclosures that some customer data was freely available to reporters and others inside the company. The fear inside banks is that Bloomberg could use that data not only to write negative news articles but also to compete directly.

In recent years, Bloomberg has offered new ways to trade stocks, bonds and more complicated financial products, potentially taking revenue from subscribers to the ubiquitous Bloomberg desktop terminals, which contain a vast store of market data. The expansion is even leading Bloomberg to offer traditional Wall Street services like wealth management and research.

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“If you add all this stuff up together, they do look increasingly like a brokerage business,” said Larry Tabb, founder of the consulting firm Tabb Group.

He said that Bloomberg was not yet a dominant force in these activities and had been careful to placate the concerns of subscribers. But, he said, “it makes some of these brokers think, are these guys friend or foe?”

Bloomberg says its trading operations are walled off from its data operations and asserts that it has won the trust of clients over the years. The company is eager to protect both its revenue and the wealth of Michael R. Bloomberg, which are still primarily generated by the terminals business.

But the sources of revenue are changing.

Bloomberg’s expansion has been motivated in part by a slowdown in the core terminals business. Before the financial crisis of 2008, executives had created the 10B initiative, which had the aim of increasing the company’s annual revenue to $10 billion by 2014, according to company employees who spoke on the condition of anonymity out of fear of jeopardizing their careers. Last year, with revenue stuck at about $8 billion, this goal has been quietly de-emphasized, the employees said.

The expansion has taken place in many new areas, including products that provide political and sports intelligence. But the continuing efforts to capture Wall Street business are particularly tricky because they risk alienating the financial firms that pay for most of the terminals.

“They have to be very careful in how they sell themselves, and who they broker to,” said David B. Weiss, a senior analyst at the Aite Group. “You don’t want to mess with a $6 billion a year golden goose.”

Bloomberg executives have said the firm is only moving into areas that complement its core business of allowing customers to analyze data and communicate with subscribers. Lengthy contracts stipulate the ways that Bloomberg can use information it gathers about terminal users.

Still, financial companies are seeking assurances from Bloomberg that important data is not finding its way into divisions at the company that could exploit it. Bloomberg executives apologized after Goldman Sachs and other banks complained that Bloomberg’s journalists were able to look at information about when customers logged in and what functions they were using.

People close to the company said Tuesday that the same data had been accessible to employees in its trading division, known as Bloomberg Tradebook, but that the company had cut off that access recently.

Bloomberg has said from the beginning that it shields specific trading activity of customers from employees not authorized to see it.

The criticism of Bloomberg has been caused in part by Wall Street’s desire to push down the steep $20,000 yearly price tag for a Bloomberg terminal. Many bankers say they have little choice but to pay if they want to communicate with their customers, most of whom are on Bloomberg’s networks.

Thomson Reuters, Bloomberg’s primary rival in the data world, also provides trading capabilities, but it rarely vies for the trades itself and emphasizes what it calls its neutrality. The company has not moved into many of the business lines where Bloomberg is now looking to make money.

“Our strategy is to partner with our customers and not to compete with them,” said Yvonne Diaz, a spokeswoman for Thomson Reuters.

The most obvious business line that competes with Wall Street is Tradebook, a subsidiary of Bloomberg that is registered to trade on behalf of clients, collecting valuable commissions for each trade. It is fighting for those commissions with trading desks across Wall Street.

Tradebook was originally created in 1996, 14 years after Mr. Bloomberg founded the larger company. For many years, Tradebook failed to gain much traction, but in 2010 it hired an ambitious new chief executive, Ray Tierney, from Morgan Stanley.

Mr. Tierney has helped Tradebook win a greater market share in stocks and options and has developed new products. Last fall, it introduced Bloomberg Pool, which serves as a competitor to Wall Street’s dark pools, where stock trades are executed away from the public exchanges.

Beyond Tradebook, Bloomberg’s clients use the company’s software to look for and execute trades in many different markets, putting the company at the center of the information flow between buyers and sellers. Bloomberg says this data is protected even within the company.

Bloomberg will be adding to its trading operations soon, when it introduces a type of electronic exchange for financial instruments known as swaps, one of the most heavily traded products on Wall Street. Bloomberg expects to charge customers for using the service.

Like other Wall Street firms, Bloomberg has not been afraid to resort to legal muscle to protect its swaps business. It has hired a top Washington lawyer, Eugene Scalia, to challenge rules for the swaps exchanges that were proposed by the Commodity Futures Trading Commission.

The company contends that the commission’s rules could prompt investors to move out of the swaps market into another market that could be weaker and less transparent. But some industry officials have argued that the case is motivated by Bloomberg’s desire to bolster business for its own swaps trading operation.

Bloomberg is even showing signs that it wants a slice of that most traditional of Wall Street businesses, investment advice for individuals. Its offering in this area, BloombergBlack, is in a testing phase. It is intended to serve somewhat like a scaled-down Bloomberg terminal for investors at home. Automated money management is seen as a growth opportunity by many brokerage houses.

“The perfect customer for this is a guy who’s done a lot of investing and it’s a hobby for him,” said Joshua Brown, a financial adviser at Fusion Analytics, and author of the Reformed Broker blog. “That’s a pretty good market.”

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Manufacturing Growth in China Slows

HONG KONG — Growth in China’s important factory sector slowed in April, a closely watched monthly index released Tuesday showed, adding to concerns that the pace of China’s overall economic growth may be faltering.

The index, which is based on a survey of purchasing managers in the manufacturing sector and released by HSBC, came in at 50.5 points for April — still above the level of 50 that separates expansion from contraction, but markedly lower than the 51.6 points recorded for March.

The release is one of the earliest measures of business activity available for the month of April and appears to indicate that an unexpected growth slowdown during the first quarter may be carrying on into the second quarter.

China’s first-quarter growth data, released by the authorities in Beijing last week, surprised analysts who had believed that the economy had picked up speed during the months of January, February and March. Instead, expansion slowed to 7.7 percent from a year earlier – down from 7.9 percent the previous quarter.

The manufacturing survey released on Tuesday reinforced the view that growth is unlikely to pick up again during the current quarter.

‘’The overall message’’ from the release ‘’is that there was some improvement in the manufacturing sector’’ around the start of the fourth quarter of 2012, but that ‘’the momentum then stalled’’ in the first quarter of this year, wrote Yao Wei, China economist at Société Générale in Hong Kong.

Investors, unnerved by the disappointing reading, sent the mainland China stock market down 2.6 percent on Tuesday. In Hong Kong, the Hang Seng fell 1.1 percent.

In part, weakening demand for exports is to blame. Orders for new exports contracted in April after a temporary rebound in March, suggesting external demand for China’s exporters remains weak, according to Qu Hongbin, a China economist at HSBC.

Weaker overall demand has also started to weigh on employment in the manufacturing sector and is likely to prompt Beijing to respond with efforts to lift domestic investment and consumption in the coming months, Mr. Qu added in a statement accompanying the index.

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In Surprise, Recovery in China Loses Steam

HONG KONG — The Chinese economic recovery lost some of its momentum during the first quarter of this year, official data released on Monday showed, surprising analysts who had expected growth to accelerate on the back of ample credit, strong infrastructure spending and firm exports.

The economy expanded by just 7.7 percent during the first three months of the year, compared with a year earlier, short of the 8 percent that economists polled by Reuters had projected, and slower than during the previous three months, when gross domestic product rose 7.9 percent year-on-year.

Disappointing industrial output data for March also underlined the fading momentum. Year-on-year growth dropped to 8.9 percent, the lowest pace of expansion since August 2012, when fears of a “hard landing” in China were widespread.

The surprisingly poor data raised concerns among some analysts that the slowdown could intensify later in the year, due the effects of recent government measures aimed at curbing property price rises and tempering risks from the growth of lending outside of the banking system.

“While August 2012 proved the bottom for last year’s downturn, we doubt March will be the turning point for 2013, given macro policy has shifted to a tighter stance with renewed controls on the housing market, local government financing vehicles and wealth management products,” Xianfang Ren and Alistair Thornton, analysts at IHS Global Insight in Beijing, wrote Monday in a research note.

Fears over the outbreak of avian flu and new signs of slowing investment momentum could also sidetrack growth in the second quarter of this year, Li-Gang Liu, a China economist at the bank ANZ in Hong Kong, wrote in a research note.

Chinese authorities on Monday played down the slowing growth.

“Our overall judgment is that, although there was a slight dip in growth in the first quarter, it was generally speaking a steady start with stable progress,” Sheng Laiyun, a spokesman for the Chinese statistics bureau, told a televised news conference in Beijing. “China’s basic circumstances have not undergone any fundamental shift, and it still has the conditions for maintaining sustained and healthy economic development over the long term.”

The country’s industrialization and urbanization would remain powerful engines for relatively rapid growth, Mr. Sheng said, while the data also contained signs that domestic consumption was making a growing contribution to that growth, displacing China’s traditional reliance on industrial and infrastructure investment.

Still, the disappointing headline growth figures helped send stock markets across most of Asia lower on Monday.

In mainland China the Shanghai composite index dropped 0.9 percent by early afternoon. The Hang Seng in Hong Kong and the Nikkei 225 in Japan both fell about 1.5 percent, and in Australia, the S.P./ASX 200 fell 1.3 percent.

Analysts had widely expected China’s economy, the world’s second biggest after the United States, to have picked up more steam during the first months of the year, as a tide of credit flowed into the economy, and government-mandated investment in infrastructure projects picked up.

In fact, the growing scale of credit has begun to worry an increasing number of analysts, who warn that the resulting buildup of debt bears substantial risks, including asset price bubbles and potentially destabilizing defaults.

Fitch Ratings last week expressed concerns about the long-term consequences for China’s financial stability over the country’s huge buildup in debt, particularly borrowing by local governments.

The ratings agency reduced its default rating on China’s long-term local currency debt to A+, from AA–.

Data released last week showed that total social financing, the central bank’s broad measure of liquidity, surged in March to 2.4 trillion renminbi, or about $390 billion — more than double the February number.

On Friday, the recently appointed Chinese Prime Minister Li Keqiang said the newly installed leadership in Beijing faced the twin tasks of maintaining growth while overhauling the economy.

“To come to grips with economic policy, we must both keep a steady footing and focus on upgrading,” Mr. Li told a group of economists and business executives in Beijing, in comments reported by the official Xinhua news agency on Sunday.

“Since the start of the year, China’s economic performance has overall made a steady start, and this will help to stabilize everyone’s expectations,” he said. “But at the same time, we must see that there are still quite a few unstable and uncertain factors in the domestic and international environment, and deep-seated problems are constantly arising.”

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Vice Premier Urges Reduction in State Control of China’s Economy

BEIJING — A member of the top Chinese decision-making body called Sunday for sweeping economic changes, including a reduction in state control, as China’s economy struggled with surplus production capacity and risks to the financial system.

Deputy Prime Minister Zhang Gaoli, a member of the Politburo Standing Committee, warned that failure to make changes would consign the economy to years of low-quality growth.

“There are increasing downward economic pressures, and the problem of excess capacity is worsening,” Mr. Zhang said. “Objectively speaking, there are potential risks in the financial area.”

China’s economy, worth 52 trillion renminbi, or $8.4 trillion, fought its worst slowdown in 13 years last year after weak exports and interest rate increases from the year before dragged annual growth down to 7.8 percent — impressive by world standards but the grimmest for China since 1999.

The downturn, which surprised many with its length and depth, led analysts to warn that China’s days of heady, double-digit economic growth were over and that broad changes were needed.

History had shown that the only way to surmount growth obstacles was to embrace sweeping changes, Mr. Zhang said.

“This is a very important job for us,” he told a business forum, saying areas that needed change included government institutions, the household registration system and environmental protection standards.

“If not, even if our absolute economic size gets bigger, our economy, our growth standards, will still be at the mid to low end,” he added.

Some areas often cited by analysts as in pressing need of change are freeing China’s interest rates market, allowing more private investment in the economy, encouraging consumption and “greener” growth and enforcing the rule of law.

Mr. Zhang sought to assure foreign companies that China, which is often accused of impeding competition by subsidizing state-owned enterprises, was open for business.

“Some of our friends from abroad are very concerned about China’s investment environment,” he said. “I can tell you fair competition is our common goal.”

The new Chinese government, which is led by President Xi Jinping and Prime Minster Li Keqiang and which formally took office this month, has vowed to start such changes. But resistance to change by interest groups means any shift is likely to be gradual, analysts say.

Mr. Zhang said, “Where control is required, the government must exert control and control it straight and well. Where control is not needed, then the government should not control and intervene.”

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Manufacturing in China Picks Up in March

HONG KONG — Manufacturing activity in China perked up in March after a lull during the Lunar New Year holiday in February, underlining that China’s economy appears on track for solid — but not sizzling — growth this year.

A closely-watched index of sentiment in China’s vast manufacturing sector, published by HSBC on Thursday, showed a reading of 51.7 points in March. That was a marked improvement from the 50.4 in February, when many factories shut for a week or more during the New Year break, and took the reading well above the level of 50 that separates expansion from contraction.

But despite the rebound, the March result was shy of the level seen in January — yet another indicator that the Chinese economy has settled into a more modestly paced growth stage than it experienced prior to global financial crisis.

The purchasing managers’ index reading “implies that the Chinese economy is still on track for gradual growth recovery,” Qu Hongbin, chief China economist for HSBC, wrote in a statement accompanying the data release. “Inflation remains well behaved, leaving room for Beijing to keep policy relatively accommodative in a bid to sustain growth recovery.”

Improving overseas orders for Chinese-made goods and a flow of government-mandated investment into infrastructure projects helped pull the Chinese economy out of a slowdown last year, averting the so-called “hard landing” that many economists had feared might occur.

The upturn has, however, been gradual, in part because the policymakers in Beijing have been eager to steer the economy away from the overheated growth seen before the financial crisis and towards more a modest pace of expansion, easing the risks of inflation, potential loan defaults and inefficient investment.

Longer term, China’s demographics — its labor force will shrink as the population ages — mean that the productivity of workers and companies will have to rise. The new leadership in Beijing is betting on faster urbanization as a key driver of future growth and rising wealth for China’s 1.3 billion inhabitants.

Analysts caution, however, that a range of potentially tough reforms will also be needed — including, for example, allowing more private-sector competition in areas currently dominated by sprawling state-owned enterprises, and weaning the economy off its reliance on state-driven investment and exports.

“China’s new leaders pledged to make the Chinese dream come true by bringing benefits of growth to the people. This requires a difficult balance between growth and reform,” economists at Citibank wrote in a research note on Monday. “Reform is likely painful but there is no alternative.”

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