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Reuters

Victoria Ruan

Mainland factories last month suffered their fastest drop in activity in a year as new orders shrank, a private business survey showed on Monday, hardening the case for fresh stimulus measures to halt a slowdown in the world's second-largest economy.
The latest indication of deepening factory woes raises the risk that second-quarter economic growth may dip below 7 per cent for the first time since the depths of the global crisis, adding to official fears of job losses and local-level debt defaults.
The HSBC/Markit purchasing managers' index fell to 48.9 in April - the lowest since April 2014 - from 49.6 in March, as demand faltered and deflationary pressures persisted.
The number was lower than a preliminary reading of 49.2 and also fell below the 50-point level that separates growth from contraction compared with the previous month.
"Today's downbeat PMI reading suggests that underlying economic momentum has continued to soften, even as a rebound in April's activity data still appears likely given fading seasonal distortions," Capital Economics' economist Julian Evans-Pritchard said.
The overall new orders sub-index dipped to 48.7 last month, the sharpest contraction in a year. It suggested a marked deterioration in domestic demand, as new export orders showed tentative signs of improvement.
"China's manufacturing sector had a weak start to Q2, with total new business declining at the quickest rate in a year while production stagnated," Markit economist Annabel Fiddes said.
"The PMI data indicate that more stimulus measures may be required to ensure the economy doesn't slow from the 7 per cent annual growth rate seen in Q1."
Both input and output prices declined for a ninth month, while manufacturers shed jobs for an 18th month, auguring poorly for an economy that grew at its weakest rate for six years in the first quarter.
An official survey released on Friday showed mainland factories struggled to grow last month as domestic and export demand remained weak. The official number of 50.1 was the weakest reading for the month of April since the data started in 2005, HSBC noted.
The private survey focuses on small and medium-sized firms while the official one looks at larger, state-owned companies. The mainland will release its April economic data soon, starting with trade on Friday.
China is also struggling with a downturn in its property market, slowing investment and high levels of domestic debt.
On Thursday, the Politburo said authorities would step up policy "adjustments" and urged further tax cuts. It also said the government must resolve financing glitches that are holding up big infrastructure projects.
Economic growth was expected to slow further to 6.8 per cent in the second quarter from 7 per cent in the previous quarter, the State Information Centre, a top government think tank, said.
The think tank called for interest rate cuts of 50 basis points in the first half, and reductions in banks' reserve requirements.
It also urged the government to lower the yuan's real effective exchange rate by up to 2 per cent to help boost exports.
Additional reporting by Victoria Ruan


China's factory index dips as new orders shrink

Growth is tipped to slow to 6.8 per cent in the second quarter. Photo: Bloomberg

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China

Economy

China Economy

Manufacturing activity the worst in a year, bolstering calls for fresh efforts to spur economy
