Cheaper off-shore labour and production costs, interest rate rises, inflation and a rising Aussie dollar have collectively cruelled the Australian manufacturing industry.
Cheaper off-shore labour and production costs, interest rate rises, inflation and a rising Aussie dollar have collectively cruelled the Australian manufacturing industry. Contributed

China may retain strength after all

BETTER than expected data from a survey of Chinese manufacturers delivered a boost to world stock markets yesterday.

Asian equities exchanges jumped in response to the revelation that the latest Chinese Purchasing Managers Index (PMI) rose to 50.3 in December, after dipping into negative territory the previous month.

Readings above 50 signal an expansion in activity.South Korea's Kospi index rose 2.5 per cent in response, while Hong Kong's Hang Seng gained 2 per cent. The FTSE 100 and the Dow Jones both headed higher.

Equity indices in Brazil and Mexico, countries which are large exporters of commodities to China, also bounced on the news.

Market sentiment was further boosted by data from Germany showing a fall in unemployment to 6.8 per cent.

The optimistic response of financial markets to the Chinese manufacturing data indicates the country's importance to the global economy.

The International Monetary Fund has forecast that the Chinese economy will grow by 9 per cent in 2012.

"The data from China and Germany added to risk appetite from global investors, so that's going to lead the market higher," said William Castro Alves, an analyst with XP Corretora in Rio de Janeiro.

However, Lu Ting, an economist with Bank of America-Merrill Lynch, warned that the Chinese manufacturing PMI level may have been distorted by a pre-Chinese New Year pick up in activity.



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