China manufacturing grows more than expected

China's manufacturing grew at a faster pace for the fourth consecutive month in November, indicating that the economy can withstand higher interest rates as price pressures increase.

The purchasing managers index rose to 55.2 from 54.7 in October, the China Federation of Logistics on its website today. That was more than the 54.8 median estimate of 14 economists surveyed by us. A PMI published by HSBC Holdings Plc jumped also.

Today's reports showed that increasing input prices, strengthening the case that the central bank to boost borrowing costs again after that behind counterparts in Malaysia to South Korea. The concern that monetary tightening will hinder corporate profit growth driven by 8 percent selloff in the benchmark stock index in China in the last month.

"The risk of a sharp slowdown in growth has slowed, but all signs suggest that inflation can surprise on the upside," said Dong Tao, an economist at Credit Suisse AG in Hong Kong. He called the input price data "alarming."

Federation of Logistics PMI showed the strongest reading in seven months, while HSBC and as published by Markit Economics was at a maximum of eight months of 55.3.

The Shanghai Composite Index closed up 0.1 percent, rising for the first day in four.

Strength in Asia

The image of China's increased production and escalating prices across Asia are repeated in reports released today by HSBC and Markit for India, South Korea and Taiwan.

India need to keep tightening monetary policy, an economist at HSBC, Leif Eskesen said, commenting on the PMI data shows the nation's fastest growing manufacturing in six months. Taiwan had its first expansion in four months and South Korea also rose from a contraction.

By contrast, an Australian measure slipped, a report by the Australian Industry Group and PricewaterhouseCoopers showed today. In the U.S., manufacturing growth probably fell to a maximum of five months, according to the median estimate before the release today of the Institute for the index of Supply Management's factory.

Chinese reports reinforced economists' forecasts of higher rates. Credit Suisse said today that the increase is probably around December 13 when the government will announce the latest prices.

Price increase

In October, China's central bank took the rate of one-year loans to 5.56 percent, the first increase since 2007. In comparison, South Korea has happened twice this year, Malaysia and India three times six.

Ben Simpfendorfer, an economist at Royal Bank of Scotland Plc, said the increase in inventories is shown in today's data may indicate that companies restocking end, easing producer price pressures and causing a "modest "slower growth in the first quarter.

The index of the federation of logistics input costs rose to 73.5, the highest since June 2008. HSBC's report showed that manufacturers' output prices rose by the most since data began in 2004.

Cement prices have risen to a record, the state-run China Daily reported today. Consumer prices may have risen 4.8 percent in November after an increase of 4.4 percent in October, which was the highest in 25 months, the China International Capital Corp.

Slowing growth

McDonald's Corp., the biggest restaurant chain, rising prices in China on 17 November to offset rising costs. Kweichow Moutai Co., the largest Chinese manufacturer of alcoholic beverages by market value, may raise prices as much as 24 percent this month, according to a report of Shenyin & Wanguo Securities Co.

Zhang Liqun, a senior researcher at the Center of State Council Development Research, said that while PMI data shows an "improved economic climate," the expansion of the nation will remain moderate. The leaders meeting in Beijing later this month to set economic policy will gauge the risk of debt crisis in Europe, China's largest market, reduced export demand.

Bank of America-Merrill Lynch said the data today supports its forecast for China's economy expands at an annual rate of 9.3 percent this quarter and 10.3 percent for the year. Goldman Sachs Group Inc. said export orders and "continued strong" growth in credit and money supply, even after adjustment measures can be strengthened both PMI.

Wen Campaign

Premier Wen Jiabao announced Nov. 17 a package of measures to counter inflation, the threat of price caps for "daily use" to be committed to maintaining the food supply through the sale of state reserves. The future of China for raw materials like cotton, sugar, rice and natural rubber have risen to records in the past two months.

The government's campaign to control the money supply and prices of cold increases also include two-reserve ratio for lenders last month, draining cash from the financial system.

At the same time, the central bank has limited the yuan's gains that could help offset inflation. While the officials allowed the appreciation of about 1.8 percent against the dollar in September, since then, earnings have been 0.3 percent.

Nomura Holdings Inc. said this week that China is "a strong growth phase, even when inflation concerns rise. Citigroup Inc. said that while inflation, driven mainly by food and overall production costs, is "a key policy concern," the economy is not overheating as it did in 2007-08.

Cotton, steel

The National Commission for Development and Reform Commission, said yesterday that the price controls at the national level are not needed yet.

In the PMI surveys of purchasing managers cited price increases for agricultural products, cotton and raw materials, including fuel and steel. Spot prices of coal for power plants in the port of Qinhuangdao, a benchmark of China, rose to a maximum of two years this week.

Manufacturing growth accelerated even in the midst of a shortage of diesel and stops at the steel mills and aluminum smelters as a result of a government campaign of energy efficiency. The authorities are also trying to cool the housing market.

Economic growth slowed to an annual rate of 9.6 percent in the third quarter from 11.9 percent in the first three months of this year. Despite the moderate growth, China will overtake Japan this year to become the second largest economy in the world.

The government backed by PMI, published by Beijing-based China Federation of Logistics and Purchasing and the Office for National Statistics, covers more than 820 companies in 20 industries, including energy, metallurgy, textiles, automobiles and electronics. HSBC's survey covers more than 430 companies.