Manufacturing on the Mend
China's policies for economic stabilization are working as a preliminary manufacturing gauge rises to a 4-month high. The HSBC/Markit China flash manufacturing purchasing managers index climbed to 50.1 in August, the highest level since May, from an 11-month low in July. It is also the first time since May that the reading is above the 50 critical point that divides expansion and contraction compared with the previous month. "Supported by an increase in new orders and a modest improvement in production, China's manufacturing activity has begun stabilizing," said Qu Hongbin, HSBC chief China economist. "Supportive policies and corporate destocking helped revive the manufacturing industry and the upward trend is expected to last through the months to come."
Local Government Bond Yields at Record High
Over 50 billion yuan in local government bonds were sold in China's interbank bond market on August 19, with the yields climbing to the highest level since 2009, the China Business News reported. The 3-year local government bonds were offered with a 4.29% yield and the 5-year bonds at 4.43%, both hitting a 4-year high. Analysts say supply of local government bonds is expected to continue outstripping demand due to tight liquidity and relatively high interest rates.
'Shale Gas Rush' Fading Away
China's goal to produce a total of 6.5 billion cubic meters of shale gas in the 5 years through 2015 can hardly be fulfilled due to numerous impediments, the Securities Times reported, citing industry experts. Shale gas output totaled just 25 million cubic meters in 2011 and 2012, leaving the 6.5 billion-cubic-meter target by 2015 unachievable, even in an extended period. Costly extraction due to technical barriers and a lack of supporting policies have cut profits and therefore discouraged shale gas developers from operating in this field, experts argue.
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