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Manufacturing activity moderates, prompting more support policies

Updated: Sep 1,2014 10:37 AM     Xinhua

BEIJING -- Growth in China’s manufacturing sector moderated slightly in August, a sign of subdued momentum in the country’s economic recovery, new data showed on Sept 1.

The purchasing managers’ index (PMI) came in at 51.1 in August, down from July’s 51.7, according to data released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing.

A reading above 50 indicates expansion, while a reading below 50 represents contraction.

A majority of sub-indices retreated in August, with those measuring production, new orders and purchasing volumes registering the biggest drops.

“The PMI data indicates some downward pressure on the economy,” noted Zhang Liqun, an economist at the Development Research Center of the State Council.

In breakdown, the production index fell one percentage point from a month earlier to 53.2 percent, while the index for new orders slowed 1.1 percentage points to 52.5 after racing to its highest level since May 2012 a month earlier.

However, as indices have stayed above the 50-point watershed, Zhang maintained that the basic trend of a steadily growing economy remains.

Bucking the broader trend, the index for business outlook rebounded 2.6 percentage points to 57.9 percent, suggesting optimism for the latter half of the year, analysts said.

Also on Sept 1, British bank HSBC released the final reading for its manufacturing PMI, which came in at 50.2, slightly down from the flash reading of 50.3, the lowest level in three months.

“We think the economy still faces considerable downside risks to growth in the second half of the year, which warrant further policy easing to ensure a steady growth recovery,” noted HSBC chief China economist Qu Hongbin.

Compared with the NBS survey, the HSBC report gives more weight to small businesses.

After a shaky start this year, Chinese policymakers have pinned hopes on quickening fiscal spending and selective easing of monetary policies to support faltering growth.

The government has put more focus on optimizing credit structure by guiding more credit flow into the agriculture sector and small businesses against the backdrop of prudent monetary policy.

Helped in part by these efforts, China’s economic growth showed recovery signs in the second quarter, accelerating to 7.5 percent from the 7.4-percent expansion in the first quarter.

But with the latest data pointing to softening momentum in the economy, analysts said the government will likely to step up its mini-stimulus policies in coming weeks.

Earlier this month, the central bank set aside another 20 billion yuan (3.24 billion U.S. dollars) for a relending scheme designed to funnel credit into agriculture.

“Despite some recent disappointing indicators, we expect growth to be stabilized again in coming months as the government steps up its stimulus efforts,” said a BofA Merrill Lynch Global Research report.

The Bank maintained its 7.4-percent growth forecast for both the third and fourth quarter.

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