China, India lead way as Asia shows strength

BEIJING/SEOUL (Reuters) - Growth in China and India powered ahead last month, providing welcome support for the global economy at a time of sluggishness in the United States and most of Europe and a faltering in Japan’s recovery.

Two surveys of Chinese executives showed broad-based strength in the manufacturing sector of the world’s second-largest economy and helped boost Asian shares outside Japan by 1.7 percent.

The official purchasing managers’ index (PMI) rose to a six-month high in October of 54.7 from 53.8 in September, easily beating market forecasts of 52.9.

A figure above 50 denotes expansion; a reading below 50 indicates contraction.

The strength of the official PMI was especially striking because the index normally heads down in October, said Yu Song and Helen Qiao, economists at Goldman Sachs.

“The fact that the PMI went up despite this seasonal bias suggests real activity growth was likely to have been exceedingly strong in October,” they said in a note.

The survey showed that manufacturers continued to run down stocks last month to meet rising domestic orders, which Ting Lu with Bank of America Merrill Lynch said was a reflection of strength in construction and consumption.

“These readings bode well for a recovery of output in coming months,” Lu told clients.

A companion PMI produced by Markit for HSBC painted a similar picture, rising to 54.8 from 52.9 -- one of the largest month-on-month rises in the history of the survey.

Calling the official PMI one of the best leading indicators of the economy, Lu said the October report supported his forecast of 9.3 percent year-on-year growth in gross domestic product in the fourth quarter and 10.3 percent for all of 2010.

In contrast, the United States reported on Friday that its economy grew at a tepid 2.0 percent rate in the third quarter, reinforcing expectations that the Federal Reserve will agree this week to ease monetary policy by embarking on a new programme of bond purchases.

The HSBC Markit PMI for India, Asia’s third-largest economy, rose to 57.2 in October from 55.1 in September.

“The manufacturing sector remains supported by strong local consumption growth, and growing employment suggests that domestic demand will remain robust,” Frederic Neumann, co-head of Asian Economics Research at HSBC, said in a statement.

Not all the economic news from Asia was rosy.

The South Korean manufacturing sector shrank for the second month in a row as the HSBC/Markit PMI fell to 46.7 in October, the lowest since February 2009, from 48.8 in September.

New export orders also fell below the boom-bust line of 50 for the first time since February 2009.

But actual exports from Asia’s fourth-largest economy rose 29.9 percent in October from the same month last year.

That surpassed the 21.9 percent increase economists had expected and boosted investor confidence in the export-dependent economy. Shares in South Korea’s top automakers shot to record highs, while the won rallied against the dollar.  “It bodes well for the economy and solid overseas demand will continue to be a major driver for economic growth,” said So Jae-yong, an economist at Hana Daetoo Securities in Seoul.

Together with a jump in inflation to a 20-month high of 4.1 percent in the year to October, the data also strengthened the case for a rise in interest rates this month.

South Korea’s PMI mirrored that for Japan, released last Friday, which showed that manufacturing contracted for a second consecutive month as slowing demand and a rising yen led to the first drop in export orders in more than a year.

Development in India not a threat to China, says Chinese leader

NEW DELHI: India’s development is not a threat but an opportunity for China and the two sides should work together to further cement their strategic and cooperative partnership, a senior Chinese leader said on Monday.

“China’s development is an opportunity rather than a threat to India. Likewise, India’s development is not a threat but an opportunity for China,” Chinese Communist Party Politburo member Zhou Yongkang said here.

He was addressing a seminar on Sino- India relations organised jointly by the Communist Party of China and the Congress.

Pointing out that the two countries were more interdependent on each other for global stability, Yangkong said, “In light of such a situation, it is all more necessary for China and India to handle our relationship from a strategic height and long-term perspective.

“At the new historical starting point, let us push for the further development of the strategic, cooperative partnership between us and jointly create a harmonious world of lasting peace and common prosperity,” he said.

Observing that Chinese government policies advocated peaceful relations with India, Yongkang said the two countries should promote mutual political trust, economic and trade ties, expand friendly ties and strengthen international cooperation for further development of Sino-Indian relations.

Seeking strengthening of friendly consultations, he said, “For controversial issues and disagreements in exchanges, we should deal with them properly on the basis of mutual respect, consultation on an equal basis and the principle of mutual understanding and accommodation, so as not let improper handling of specific issues affect the overall relations.”