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China manufacturing index at six-month low, says HSBC

China's purchasing managers' index, a widely used indicator of economic health, has contracted more than predicted in the first month of 2014

PUBLISHED : Thursday, 30 January, 2014, 11:30am
UPDATED : Thursday, 30 January, 2014, 11:30am

Chinese manufacturing contracted for the first time in six months in January, HSBC confirmed on Thursday, raising questions over growth prospects for the world’s second-largest economy this year.

The British banking giant’s final reading of China’s purchasing managers’ index (PMI), which tracks manufacturing activity in factories and workshops, fell to 49.5 this month.

It was its lowest figure since July and fractionally below the preliminary 49.6 HSBC announced last week.

The index is a closely watched gauge of the health of the Asian economic powerhouse. A reading above 50 indicates growth, while anything below signals contraction.

July’s figure of 47.7 was the last time it dropped below the critical point.

Qu Hongbin, the bank’s economist in Hong Kong, described it as “a soft start to China’s manufacturing sectors this year, partly due to weaker new export orders and slower domestic business activities during January”.

“Policymakers should pay attention to downside risks and pre-emptively fine-tune policy to steady the pace of growth if needed,” he added in a statement accompanying the data.

China’s week-long Lunar New Year holiday, when the country’s shops, offices and factories largely shut down, begins on Friday.

China’s economic growth came in at 7.7 per cent for last year, maintaining its slowest expansion in more than a decade.

 

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