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New | China February HSBC PMI hits 7 month high, more rate cuts seen

Chinese policymakers are embarking on their biggest easing campaign since the depths of the global crisis as the world’s second-largest economy is weighed down by a cooling property market, high debt levels and excess factory capacity

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A worker welding at a construction site in Yunnan province in China. Activity in the country's factory sector hit a 7-month high in February. Photo: Reuters

Activity in China’s factory sector edged up to a seven-month high in February but export orders shrank and deflationary pressures persisted, a private business survey showed, adding to the view that yet more interest rate cuts will be needed.

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Chinese policymakers are embarking on their biggest easing campaign since the depths of the global crisis as the world’s second-largest economy is weighed down by a cooling property market, high debt levels and excess factory capacity.

The People’s Bank of China cut interest rates on Saturday in the latest effort to support the economy as its momentum slows. The move was its third major policy easing since late November and came just days before the annual meeting of the country’s parliament.

On Monday, a survey showed the HSBC/Markit Purchasing Managers’ Index (PMI) climbed to 50.7 in February - the strongest level since July - from 49.7 in January, as overall new orders picked up.

The number was stronger than a preliminary reading of 50.1, which was just above the 50-point level that separates growth in activity from a contraction on a monthly basis.

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But even as factory activity picked up slightly, the survey showed manufacturers struggled to cope with erratic export demand and deflationary pressures.

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