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China Economy

Growth a challenge as key China manufacturing indices fall

PUBLISHED : Monday, 03 March, 2014, 11:07am
UPDATED : Tuesday, 04 March, 2014, 1:58am

Two mainland manufacturing indices fell last month, adding to challenges for growth as Premier Li Keqiang prepares to map out the central government's strategy in Beijing this week.

The purchasing managers' index from HSBC and Markit Economics dropped to a seven-month low of 48.5, they said yesterday. A similar gauge from the government with a larger sample size fell to 50.2, the lowest since June, a report showed at the weekend. Numbers above 50 signal expansion.

The data underscore the challenges in the world's second-largest economy as officials try to sustain expansion above Li's 7 per cent bottom line while reining in credit, boosting jobs and curbing social unrest.

"The slowdown in manufacturing growth is due to a deceleration in investment, especially of credit-sensitive infrastructure and real-estate investment," said Louis Kuijs, chief China economist at Royal Bank of Scotland in Hong Kong. "There's no need to become overly concerned - the government has the policy space it needs to ensure its bottom line on growth this year while retaining financial stability."

A separate gauge of service industries from a government survey of purchasing managers rebounded to 55 last month from a record low, a report showed yesterday.

The yuan's recent fall against the US dollar, along with the recent drop in interbank interest rates and bond yields, "should be overall positive for growth", even though the declines were more related to the central bank's financial reform efforts, Lu Ting and Zhi Xiaojia, Hong Kong-based economists at Bank of America, wrote in a report.

Li will present his first annual work report to the National People's Congress tomorrow.