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Business Daily: Global Decline in Manufacturing Impacts Chinese Currency Policies

Business Daily recently published a report on China’s currency policy changes after figures on the global manufacturing sector demonstrated it was clearly declining. The report first referred to the latest major decline of China’s PMI (Purchasing Managers Index) to 49. This was the first time since February 2009 that it fell below 50. When the PMI is below 50 it is generally considered to be an indication of recession. Meanwhile, the Euro Area PMI dropped to 46.4 and the British PMI reached 47.6. Global PMI was 49.6 in November. The United States was the only exception with the PMI being 52.7, which the report called “puzzling.” The Chinese central bank responded with an immediate decrease in the Bank Deposit Reserve Ratio. Two to three more decreases in this ratio are highly likely in the first half of 2012. The market is expecting more currency related policy shifts towards loosening up the restrictions on loans. However the concern over inflation is still keeping the government from taking more dramatic actions. The report expressed the belief that the interest rate will not go down.

Source: Business Daily, December 4, 2011