Growth in manufacturing activity on the mainland slowed to a six-month low in June as domestic and export demand fell, but analysts say it could pick up in the second half as stimulus measures kick in.
The purchasing managers' index (PMI) edged down to 50.2 in June, from 50.4 in May, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing. It was 50.3 in December.
A PMI reading of above 50 indicates growth in manufacturing activity, while a reading of below 50 indicates a contraction.
The mainland PMI is compiled from surveys of 820 companies in 31 industries and has various components. While the latest reading showed a slowdown in overall activity, respondents reported that both output and stocks of finished goods expanded in June. But new domestic and export orders as well as employment contracted.
Although the PMI was down, it was higher than a market consensus forecast of 49.9, and Liu Ligang, head of Greater China research for ANZ Bank, expected faster manufacturing growth this month. 'It normally takes two to three months for fiscal and monetary policies to be felt by the real economy,' said Liu.
Beijing cut the reserve requirement ratio for banks in May, then interest rates in June - the first rate cut in the last four years - seeking to cushion the economy from the effects of slowing exports and the euro-zone debt crisis.
But Liu said a slow but continuing recovery in the US economy, positive Greek election results and the latest euro-zone debt rescue plans pointed to a possible revival in export demand. He also expected further policies from Beijing to support growth.