China Economy

China factory sector still losing momentum, HSBC PMI shows

HSBC/Markit private survey says the segment contracted for the fourth straight month in April

PUBLISHED : Monday, 05 May, 2014, 10:01am
UPDATED : Monday, 30 May, 2016, 5:01pm

Activity in the mainland's manufacturing sector last month contracted for a fourth consecutive month, a private survey showed yesterday, suggesting the world's second-largest economy is still losing momentum.

The final reading of the HSBC/Markit purchasing managers' index came in at 48.1, lower than a preliminary reading of 48.3 but up slightly from an eight-month low of 48 in March.

The figure has stayed below the 50 level, which separates growth from contraction, since the start of this year.

Output and new orders contracted last month, and new export orders slipped back into contraction after a recovery in March, the survey found.

"The latest data implied that domestic demand contracted at a slower pace but remained sluggish," said Qu Hongbin, the chief economist for China at HSBC.

"Meanwhile, the new export orders and employment sub-indices contracted and were revised down from the earlier, flash readings. These indicate that the manufacturing sector, and the broader economy as a whole, continues to lose momentum."

Qu said the government needed to take bold action to make sure the economy regained its momentum.

Last week, the mainland's official PMI rose to 50.4 from March's 50.3, indicating a slight expansion. The official PMI is weighted towards bigger and state-owned enterprises and tends to paint a rosier picture than the HSBC/Markit survey, which focuses more on smaller, private firms.

The services industry fared a little better, according to a separate official PMI released on Saturday, an encouraging sign in an economy that otherwise faces a cloudy outlook. The PMI for the services industry rose to 54.8 from 54.5 in March, the National Bureau of Statistics said.

The mainland's growth engine has lost steam in the past year, squeezed by lacklustre demand for exports and the government's push to cut its own investment in a bid to reshape the economy.

To prove the country has the mettle to enact painful reforms, Premier Li Keqiang said policy would not be loosened drastically to counter short-term dips in activity.

Growth slowed to an 18-month low of 7.4 per cent in the first quarter of this year. Economists in a Reuters poll expect growth of 7.3 per cent this year.