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Reuters

China’s factory sector contracted by the most in 15 months in July as shrinking orders depressed output, a preliminary private survey showed on Friday, a worse-than-expected result that should reinforce bets the struggling Chinese economy will get more stimulus measures.
The flash Caixin/Markit China Manufacturing Purchasing Managers’ Index dropped to 48.2, the lowest reading since April last year and a fifth straight month below 50, the level which separates contraction from expansion.
Economists had forecast a reading of 49.7, slightly stronger than June’s final reading of 49.4.
Output in July was 47.3, its lowest since March 2014. New orders and new export orders, which expanded in June, fell this month, according to the survey.
The poor survey contrasted with recent data that suggested the world’s second-largest economy was stabilising after the government said annual growth in April-June held steady at 7 per cent, slightly better than market expectations.
Continuing contraction in factory growth is likely to fuel speculation that China will further loosen monetary policy to try to stoke activity.
Economists polled this month said they expect China to reduce interest rates by 25 basis points before the year-end.
The amount of cash that Chinese banks must hold as reserves was also expected to be reduced to keep the Chinese economy growing at 7 per cent this year, the slowest pace in a quarter of a century.
Additional policy support would make it the most aggressive easing cycle overseen by the central bank since the height of the 2008/09 global financial crisis.
“The central bank will maintain its loose monetary policy in the second half this year and it will continue to apply different methods to control liquidity," said Zhu Haibin, economist at JP Morgan in Beijing, on Wednesday.
China’s Caixin Media Co is publishing the purchasing managers’ index for the first time this month after replacing HSBC as the sponsor of the survey.
Watch: China's factories may disappoint overall economy



China’s factory sector contracts most in 15 months, survey suggests

A file picture of an engineering plant in eastern Shandong province. The survey suggested activity in China's factory shrank more than analysts had expected. Photo: AFP

Caixin to take over China PMI sponsorship from HSBC

The Chinese PMI surveys, focusing on manufacturing and services on the mainland, will be provided by Caixin from August. Photo EPA

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