HSBC China Manufacturing Index Hits Eight-Month Low
Chinese manufacturing activity contracted in March to its weakest rate in eight months, data showed Monday, the latest indication of slowing growth in the world's number two economy.
The data is the latest in a string of weak indicators out of Beijing, with analysts suggesting the government could announce a series of measures to inject life back into the Asian powerhouse.
HSBC's preliminary purchasing managers' index (PMI), which tracks manufacturing activity in China's factories and workshops, fell to 48.1 from a final reading of 48.5 in February, the British bank said in a statement.
The figure is down from 49.5 in January and was the worst result since July's 47.7, according to the bank. The final figure is due out on April 1.
The index is a closely watched gauge of the health of the Asian economic powerhouse and key driver of global growth.
A reading above 50 indicates growth, while anything below signals contraction.
China's National Bureau of Statistics said earlier this month that its own official PMI reading fell to an eight-month low of 50.2 in February.
The latest figure "suggests that China's growth momentum continued to slow down" in March, Qu Hongbin, HSBC's Hong Kong-based chief China economist, said in the statement.
"Weakness is broadly based with domestic demand softening further," he added.
HSBC expects Chinese authorities to take policy steps to stabilize the economy, with actions including easing barriers to private investment, spending on urban railways, public housing and fighting air pollution, as well as "guiding lending rates lower", Qu said.
- 'Quick action needed' -
Other economists also expressed concerns, pointing out that the March figure usually benefits from a cyclical boost.
"The weakness appears even more pronounced given that there is usually a seasonal rebound after the Chinese New Year holiday," Capital Economics Asia economist Julian Evans-Pritchard said in research note.
China's annual lunar new year holiday fell in February this year.
The HSBC result came as concerns have been rising over the outlook for China's economy this year on the back of a series of soft announcements.
This month the government said industrial production for January-February rose at its slowest pace since 2009, while retail sales grew at their weakest rate in three years.
A snap Agence France Presse poll of economists earlier this month saw a median forecast of 7.4 percent economic growth in China this year.
The government this month set its annual growth target at 7.5 percent, the same as that set last year. If the actual result comes in below it would be the first time in 16 years that the objective had not been reached.
Premier Li Keqiang said at his annual press conference this month that the economy was set to "confront serious challenges this year".
The economy grew 7.7 percent in 2013, the same as in 2012 -- which was the slowest rate since 1999.
"The government needs to take quick action in view of its growth target of about 7.5 percent," Barclays Capital said in an analysis of the PMI data.
Zhang Zhiwei, economist at Nomura International in Hong Kong, expects leaders to cut the amount of funds banks must keep in reserve in the second half of the year -- a step they have used in the past to boost liquidity.
He also expects fiscal policy to turn "expansionary" in the second quarter to prevent gross domestic product growth from falling below 7.0 percent.
Evans-Pritchard of Capital Economics, however, said authorities were unlikely to take significant stimulatory action.
"Today's weak PMI reading is the latest sign that slowing credit and investment growth are weighing on domestic demand," he wrote.
"That said, with no sign of stress in the labor market, the slowdown does not yet appear to warrant a significant stimulus response."
Li emphasized at his news conference Beijing has a flexible view of the annual target, saying growth "needs to ensure fairly full employment and needs to help increase people's income".
Source: Agence France Presse
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