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China's March HSBC factory PMI contracts, job losses accelerate
[SHANGHAI] Activity in China's manufacturing sector contracted in March after two months of recovery, a private survey showed, as the world's second-largest economy remains resistant to policy easing measures.
The final HSBC/Market China Manufacturing Purchasing Managers' Index (PMI) came in at 49.6, slightly higher than a preliminary "flash" reading of 49.2 but still below the 50-mark which separates contraction from expansion. "The latest data indicate that domestic and foreign demand remains subdued amid weaker market conditions, which dampened output growth. Meanwhile, company downsizing contributed to a further decline in manufacturing employment, with the pace of job shedding the strongest since last summer," said Annabel Fiddes, an economist at Markit.
"Despite the sustained fall in cost burdens, any savings were generally passed on to clients as part of attempts to attract new business, suggesting a further squeeze on profit margins." The final PMI employment subindex came in at 47.4, its 17th straight month of contraction and the lowest reading since August 2014.
After a steady stream of support measures last year, Beijing has stepped up the pace of easing in recent months, cutting interest rates twice since late November and lowering banks'reserve requirement ratio. But many economists saw the moves as primarily aimed at keeping things from getting markedly worse, as opposed to aggressive stimulus.
The central bank finally made a major move to head off further slides in the housing market on Monday, easing restrictions on housing purchases, while the Ministry of Finance also eased up on taxation policies. However, economists and bankers question whether the moves will produce a turnaround in the ailing sector, which comprises 15 percent of the economy.
Most economists predict further cuts in interest rates and banks' reserve requirements, perhaps as soon as this month, if conditions continue to deteriorate and threaten the government's 2015 growth target of around 7 per cent.