Manufacturing in China may contract for sixth month running

BEIJING: China's manufacturing may shrink for a sixth month in April, maintaining pressure on officials to adopt more policies to stimulate economic growth, a survey of companies showed.

The 49.1 preliminary reading of the purchasing managers' index (PMI) from HSBC Holdings Plc and Markit Economics on Monday compares with a final 48.3 in March. A number below 50 points to a contraction.

The contraction, if confirmed in the final reading due May 2, would be the longest since the global financial crisis and may spur the government to lower banks' reserve requirements a third time since November. A $430 billion expansion of the International Monetary Fund's lending power in Washington talks ending on Sunday may help contain Europe's debt turmoil and shore up demand in China's biggest export market.

"The numbers in recent months have never been that good but don't show signs of falling off a cliff either," Paul Cavey, a Hong Kong-based economist with Macquarie Securities, said of the HSBC PMI. "Today's number would suggest continuation of the government's current policy of slow, cautious loosening."

The benchmark Shanghai Composite Index fell 0.1%. Premier Wen Jiabao is trying to avert a deeper slowdown in the world's second-biggest economy that will restrain world growth as US expansion shows signs of moderating.

"The earlier easing measures have started to work and hence should ease concerns of a sharp growth slowdown," Qu Hongbin, Hong Kong-based chief China economist for HSBC Holdings Plc, said in a statement. "That said, the pace of both output and demand growth remains at a low level in an historical context and the job market is under pressure. This calls for additional easing measures in the coming months," he added. China's economy expanded 8.1% in the first three months, the least in almost three years and the fifth straight slowdown.

Source - Economic Times