The chinese economy in may 2013 - Research Paper Example

According to a report by Anderlini, the rise noted in May is the eighth record of consecutive improvement of the economy with the expansion notable from the over 50% mark in the PMI. This trend implies that the Chinese economy is expanding and hence providing incentives to investors. HSBC manufacturing PMI was 49.2 in May, compared to 50.4 reported for April with a Median forecast of 49.6, which is actually a contradiction within the sector. Exports equally moved from 48.6 in April to 49.4 in the month of May (Anderlini, 2013, para 1-13).

However, despite the notable slight expansion, IMF has lowered their expectation of the Chinese economic expansion from the initial 8% for this year to slightly lower figure of 7.75%. Hsu from the Taipei Times reports that HSBC speculates the current trends observable in the performance of Yuan currency, which will lead to full conversion of the currency by 2017. This is evident from the deliberate move by the government of China to increase flexibility of exchange rates and simplification of the cross boarder dynamics for business transactions (Hsu, 2013, para 1-6).

With these speculations, the use of the Yuan currency would be more acceptable across borders, which would translate to higher economic performance. The cost price index (CPI) in China for the month of May 2013 recorded a decline from 2.4% to 2.1% and left low - the phenomenon was explained by the moderating food prices experienced, while inflation in service industry remained mildly at 2.8% for the month, because of salary and wage increases. The overall growth domestic product (GDP) for the month of May shows a slight reduction in comparison with the preceding month.

This is partly explained by a notable reduction in investment within the property and manufacturing sector of the economy. However, there was a disparity in industrial performance with the tertiary industry remaining unchanged within the market, while the primary and secondary industries recorded a decline. The decline in PMI indicates a constriction in the general manufacturing sector as per the month (UOB Kay Hian, 2013, 2-7). Lower than 50% of PMI indicates that the economic manufacturing sector has constricted as compared to the preceding month, while a record of PMI (which is above 50%) is an indicator that the economy has expanded in that month as compared to the preceding one.

According to ‘China Macro Flash” June 3rd 2013 publication, the notable 7.8%YoY GDP growth in 2Q together with the improved performance in PMI are negative indicators to investors that the government would not work on cutting the interest rates, as earlier forecasted with the prior performance (Cheng, 2013, 1; Anon, 2013, 4). Moreover, according the ‘Korea Macro Flash” June 3rd 2013 publication, the export growth in China for the period between April and May this year increased from 16.

1% YoY to 16.6% YoY. China's exports rose by +1.0% in May from a year earlier, compared to an increase of +14.7% reported for April (Karunungan and Kim, 2013). On the other hand, the import growth in China declined from 8.3% in April to 5.5% in May 2013 showing a negative improvement by 2.4 % YoY (Chang, 2013, 3). China's imports fell by -0.3% in May since the last year, compared to an