Recruiting in China

Chinese manufacturing remained weak last month with SME businesses suffering a bigger share of the pain, two surveys showed today.

The official China Federation of Logistics and Purchasing's manufacturing index strengthened slightly to 50.3 from June's 50.1.

Separately, the private HSBC purchasing managers' index fell to an 11-month low of 47.7 from 48.2 in June.

Any reading over 50 signals expansion in a sector, while a figure under 50 signals contraction.

The unexpected rebound in the official survey offered a glimmer of hope that China's slowdown is stabilising. But analysts warned that it was still too early to conclude a decisive growth rebound because the pickup "is still far too modest.

The results also reflect how China's small and medium-sized private enterprises, which analysts say make up a bigger share of HSBC's survey, are more vulnerable to efforts to tighten up lending as well as to slumping global export demand for toys, clothing, electronics and other manufactured goods.

China's big state-owned companies have easier access to bank loans and hardly compete in export markets.

The HSBC report, covering 420 companies, said output at Chinese manufacturers fell as total new orders dropped at the sharpest rate in 11 months because of a decline in new business in both China and overseas. Export orders fell for the fourth month in a row, though at a slower pace.

Exporters said that new sales to Europe, Southeast Asia and the US fell from June. Chinese manufacturers also shed jobs at the fastest pace in four years.

The federation's survey of 3,000 businesses, meanwhile, found production, new orders and most other sub-indicators moved higher. New export orders improved but remained below an index reading of 50 last month.

Fallout from China's manufacturing slump may be felt globally, as declining orders result in less demand for commodities from countries such as Australia and Brazil and for industrial components from Southeast Asia, Taiwan and South Korea.

China has recorded five quarters of growth below 8% in a row - a substantial economic cooling for a country that previously grew at double-digit rates. Analysts said the survey results indicate smaller private companies may still be feeling the effects of a credit shortage that began in June as Chinese regulators try to rein in a lending boom over fears it could race out of control.

The credit crunch caused interest rates on loans between banks to spike to a record high. China's central bank wants to tighten lending standards, which should reduce risk but is likely to reduce financing for private businesses that generate China's new jobs and wealth.