Coastal regions suffering slowdown in production

Manufacturers in East and South China's costal regions are facing a continued slowdown in production, insiders and analysts warned on Tuesday, after many provinces saw a decline in the growth rate of industrial value-added output in the first two months of 2012.

East China's Zhejiang Province recorded an output of 140 billion yuan ($22 billion) in January and February, up 2.9 percent year-on-year, 9.6 percentage points lower than the growth rate in the same period last year, according to figures from the Zhejiang Provincial Bureau of Statistics.

"Sagging industrial production in the traditional low-cost manufacturing regions along China's coast was caused by sluggish exports and inventory cutting in many manufacturing enterprises to curb overcapacity," Wang Guobing, a macro economy analyst with Jilin-based Northeast Securities, told the Global Times yesterday.

"Demand remains weak and it takes months for new capital, triggered by slightly loosened credit, to flow to buyers and investors," Zhou Xia, an analyst with Shanghai-based Haitong Securities, told the Global Times yesterday.

Meanwhile, industrial value-added output in Guangdong Province grew by 5 percent year-on-year in the first two months, the slowest pace since July 2009, according to the Guangdong Provincial Bureau of Statistics.

In comparison, its output growth was 15.2 percent in the first two months of 2011.

Rising raw material costs and shrinking profit margins at the end of last year had a great impact on Guangdong's industrial growth, Shanghai-based China Business Weekly reported yesterday, citing Qiu Jun, a Guangdong statistics bureau official.

Manufacturers' price competitiveness has been undercut in recent years by cheaper manufacturing in places with even lower wages, like some parts of Southeast Asia and China's inland provinces, Qiu noted.

"That shift is good for China's economy in the long term," Xiao Yaofei, an economics professor with Guangdong University of Foreign Studies in Guangzhou, told the Global Times.

"As the pressures of the slowing global economy grow heavier on China's manufacturers, the government will have to weigh how much they will tolerate the inevitable strife of further economic transition," Xiao said on Tuesday.