Thursday, March 22, 2012

China manufacturing falls to four-month low, adding to growth fears

SHANGHAI: China's manufacturing activity fell to a four-month low in March, HSBC said Thursday, adding fuel to concerns over slowing growth in the world's second largest economy.

HSBC's preliminary Purchasing Managers Index (PMI) fell to 48.1 in March from 49.6 in February, following a sharp slowdown in exports, the British banking giant said in a statement.

A reading above 50 means expansion, while below 50 suggests contraction.

The data will add to pressure on policymakers to further loosen monetary policy and comes days after Australian resources giant BHP Billiton said China's demand for iron ore, a key manufacturing component, was flattening.

It is also the latest in a string of negative news from Beijing including a huge trade deficit in February and lawmakers' decision this month to set a target for 7.5 per cent growth this year, from 9.2 per cent last year and 10.4 per cent in 2010.

"Investors are already pessimistic about the economic outlook and the just released weak PMI data has raised more worries," Shen Jun, a Shanghai-based analyst at BOC International, told AFP.

The result marks the fifth month that the PMI has remained in contraction since reaching 47.7 in November last year.

"Growth momentum could slow down further amid a combination of sluggish new export orders and softening domestic demand," HSBC's chief economist for China Qu Hongbin said. "This calls for further easing steps from the Beijing authority," he said in the statement.

China's central bank in February cut the amount of cash banks must hold in reserve for the second time in three months as policymakers moved to increase lending and boost domestic consumption.

Beijing has pledged to "fine-tune" policy to prevent a hard landing for the economy, which could trigger widespread job losses and spark social unrest.

The HSBC survey also said the manufacturing slump had led firms to cut back, sending employment to its lowest level in three years in March.

"Worryingly, employment recorded a new low since March 2009, suggesting slowing manufacturing production was hindering enterprises' hiring desire," Qu said. No figure was given.

China was hit by a wave of labour unrest late last year, as employees protested over low salaries, wage cuts and poor conditions amid company cutbacks due to the global economic slowdown.

Chinese stocks fell after the data was released, with the benchmark Shanghai Composite Index down 0.42 per cent at midday.

- AFP/wm

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Source From Channel News Asia

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