Chinese factory decline slows

CHINA’S powerful industrial base slowed only slightly this month, according to HSBC’s index of the country’s manufacturers – which revealed the best performance since September.

The purchasing managers’ index (PMI) reading for Chinese factories rose to 49.7 yesterday, very narrowly below the neutral 50 mark, indicating a slight contraction for the fifth month. Analysts had expected a lower figure.

The new exports part of the index was stronger, at 52.7, the best result in two and a half years.

“Some tentative signs of stabilisation are emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs. But downside risks to growth remain, particularly as the property market continues to cool,” said Hongbin Qu, HSBC’s chief China economist.

“We think more policy easing is needed to put a floor under growth in the coming months,” he added.

On Wednesday, credit ratings agency Moody’s downgraded the country’s property sector to negative, expecting a considerable slowdown in sales growth after a 26 per cent expansion last year.

An analyst linked to China’s state council also suggested yesterday that the country’s growth rate could continue its recent decline, falling to five per cent within the next three years.

Ren Zeping, who works for China’s Development Research Centre, indicated that the country’s 7.5 per cent growth target would not be met in the future.

Threadneedle Investments added that it is expecting growth to slow down to around seven per cent this year. “The structural challenges facing the Chinese economy continue to build, with an oversupply in the real estate market and rapid credit growth being some of the main factors,” it said.