which largely reflects the private manufacturing sector – has remained stubbornly below the 50-point level separating accelerating from slowing growth since June 2011.
Unlike the patchy results seen in previous months, in November almost all the sub- indices in the HSBC survey concurred in showing an improving economy.
The one exception was a fall in the sub-index measuring output prices, demonstrating that manufacturers are still struggling with overcapacity and relatively weak domestic demand. That could also reflect the weight in the survey of exporting firms, which have less ability to raise sales prices, said Standard Chartered's Li.Indeed, China's exporters are increasingly squeezed by rising domestic costs and competition from new international suppliers, Zhou Haijiang, head of Chinese textile exporter Hodo Group, told reporters this month.
"Not only Western countries manufacture industrial goods, but also a lot of developing countries including former socialist countries who now have market economies are all exporting, thus creating a global surplus that cannot be changed," Zhou said.
"Because of this it is hard to raise sales prices, everyone is selling and it is hard for manufactured goods prices to rise. In some cases prices have even fallen."
Analysts expect no further cuts to interest rates this year or next after back-to-back cuts in June and July, and only one more 50 basis point cut to banks' required reserve ratios (RRR) in 2012 after three since late 2011 that have freed an estimated 1.2 trillion yuan for new lending.
Chinese banks are on course to make new loans worth more than 8.5 trillion yuan ($1.4 trillion) in 2012, expansionary versus the 7.5 trillion of new loans extended in 2011 and above the 8 trillion yuan that sources told Reuters back in February was the target for 2012.
Total social financing aggregate, a broad measure of liquidity in the economy, weakened to 1.29 trillion yuan in October, down from 1.65 trillion yuan in September, but still remained on track to hit a record 14 trillion yuan this year.
China also opened many previously-closed sectors to private investment with a view to funding new infrastructure projects and supporting economic growth without piling on more debt that local governments can ill-afford.
Although analysts expect fourth quarter GDP growth to outpace the 7.4 percent seen in the third quarter, full-year expansion for 2012 is expected to be the slowest in 13 years.