HSBC: China manufacturing shrank again in January

[BEIJING] Chinese factory activity contracted in January for a second straight month, a closely watched private survey showed Monday, a day after the government announced the first official decline in the sector in more than two years.

British banking giant HSBC said a preliminary reading of its purchasing managers' index (PMI) showed it had edged up to a final reading of 49.7 last month, from 49.6 in December.

But the result still showed shrinkage in the manufacturing sector of the world's second-largest economy, a key driver of global growth. PMI readings above 50 point to growth.

The result was also slightly worse than the preliminary reading for the month of 49.8, HSBC said.

The index, compiled by information services provider Markit, tracks activity in China's factories and workshops and is a closely watched indicator of the health of the Asian economic giant.

The figure came an official Chinese survey on Sunday showed manufacturing activity contracting for the first time in more than two years.

China's official PMI for January, released by the National Bureau of Statistics, came in at 49.8 last month, down from 50.1 in December.

It was the first official contraction reading for 27 months.

"We think demand in the manufacturing sector remains weak and more aggressive monetary and fiscal easing measures will be needed to prevent another sharp slowdown in growth," Qu Hongbin, HSBC chief economist for China, said in the release announcing the bank's figure.

The manufacturing weakness comes after China's economy expanded 7.4 per cent in 2014, slower than the 7.7 per cent in 2013 and the worst result since the 3.8 per cent recorded in 1990.

China's economy has been beset by problems including soft manufacturing, weak exports and falling property prices, though the government has been satisfied so far that the slowdown is under control as employment has remained resilient.

Nevertheless, authorities have taken some steps to try and put a floor under growth, carrying out limited stimulus measures last year and even cutting benchmark interest rates in November for the first time in more than two years.

AFP