Growth slows for China's manufacturers, PMI shows
April's purchasing managers' index figure only marginally on positive side, HSBC finds
Mainland manufacturers found operating conditions improved only marginally in April, indicating a weak economic recovery, a private survey has shown.
Beijing may be prompted to roll out more pro-growth steps but drastic stimulus plans seem unlikely. Mainland political leaders said at a recent Politburo meeting that they saw a need to "strengthen the momentum of economic growth", but cautioned against financial risks.
The HSBC purchasing managers index, based on a survey of more than 400 mainland manufacturers by HSBC and Markit, posted a final reading of 50.4 in April, down from 51.6 in March and slightly below the preliminary reading of 50.5 reported on April 23.
The result was in line with an official PMI index released on May 1, which read as 50.6 in April, below the market consensus of 50.7, and 50.9 in March.
Both PMI gauges, however, held above the threshold of 50, indicating a slight expansion has continued.
HSBC's chief China economist, Qu Hongbin, said: "The slower growth of manufacturing activities in April confirmed a fragile growth recovery of the Chinese economy as external demand deteriorated and renewed destocking pressures built up.
"Looming deflationary pressures also suggest softer overall demand conditions. All this is likely to weigh on the labour market, inviting more policy responses in the coming months."
Manufacturers' production grew for the sixth month in a row, albeit at a slower rate, the HSBC PMI report showed. New orders growth fell to a five-month low, while new export orders dropped for the first time since December.
However, the State Information Centre forecast that economic growth will accelerate to about 8 per cent in the second quarter, after slowing to 7.7 per cent in the first, partly because infrastructure investment is expected to keep growing at a "relatively fast" pace.
The Shanghai stock market fell 0.17 per cent to close at 2,174.12, after a three-day holiday break. But the yuan climbed to a 19-year high in intraday trading yesterday after the People's Bank of China raised the reference rate to a record 6.2082 per US dollar.
Although the central bank said the yuan's trading band would be widened "in the near future", analysts at Capital Economics said that it may not happen anytime soon, given the current strong appreciation pressures on the yuan.