China’s factory activity drops to 1-year low
Print Edition
CHINA’S manufacturing activity may continue to contract in April and fall to a one-year low, a survey showed.
The HSBC Flash China Manufacturing Purchasing Managers’ Index, the earliest available indicator of China’s industrial sector, hit 49.2 in April, down from the final reading of 49.6 in March, HSBC and research firm Markit said yesterday.
The PMI has been below the demarcation line of 50, which separates expansion from contraction, for the second consecutive month after a brief rebound in February.
Qu Hongbin, chief economist for China at HSBC, said the weak reading showed continued deterioration in China’s manufacturing sector.
“Total new business declined for the second consecutive month ... relatively weak demand conditions were also highlighted by stronger deflationary pressures in the sector,” Qu said. “Meanwhile, job shedding across manufacturing firms was recorded for the 18th month in a row.”
One bright spot was demand from overseas, with new exports rising for the first time in three months in April.
Zhu Haibin, an economist at JPMorgan, said China needs to boost efforts to bolster the weak manufacturing sector.
“Further actions are likely to be taken in the coming months after the recent monetary easing to address the near-term growth concerns,” Zhu said.
The People’s Bank of China announced on Sunday a 1-percentage-point cut in the reserve requirement ratio, which lets commercial banks put aside less money as reserves to allow more liquidity in the market. The size of the cut was the largest since 2009.
“We expect additional rate cuts in the second quarter,” Zhu said.
China’s economic growth slowed to 7 percent in the first quarter, the weakest quarterly growth in six years. China has set the official annual growth target at around 7 percent for this year, down from the previous goal of 7.5 percent.
The World Bank and the Asian Development Bank have both forecast China’s economy to grow slower this year between 7 percent and 7.2 percent.
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