Chinese Manufacturers Cutting Back Production

Producers of styrene-butadiene rubber (SBR) and polybutadiene rubber (BR) in parts of China are reporting weakening downstream demand due to cutbacks in the tyre industry. One unnamed large tyre manufacturer in Guangdong province has recently shut down operations at its factory, and several other manufacturers in Zhejiang and Anhui provinces have cut operating rates by 50 to 60 per cent due to a lack of cash and poor sales, trade and produce sources claim.

This sort of operational curtailment is typical of what is taking place across China. In line with the slowdown in the economy, China’s manufacturing sector shrunk in October, based on the latest reading of its Purchasing Managers Index, as exports orders have declined. “The production cut(s) (were) a reflection of the macro economy,” said Lin Songli, a Shenzhen-based economist at brokerage firm Guosen Securities, who expects the country’s economic expansion to slow to 9.7-9.8 per cent this year from 11.4 per cent in 2007. The slowdown would be more pronounced next year, with growth decelerating to 8.5-9.0 per cent, Lin added.

The People’s Bank of China has reduced interest rates three times in the past two months in a bid to boost consumption, in the hope that a sharp deceleration in growth can be prevented.