China’s manufacturing may grow at the slowest pace in seven months this month, a preliminary index showed, adding to signs the economy is cooling as the Chinese government widens efforts to prevent overheating.
The HSBC Flash China Manufacturing PMI released by HSBC Holdings PLC and Markit -Economics yesterday dropped to 51.5 this month from 54.5 last month. It was the first time they released an advanced reading. A gauge of output fell to 51.8, also a seven-month low, the statement said.
Chinese officials are seeking to sustain the expansion of the world’s second-biggest economy while reining in credit growth to counter accelerating inflation and the risk of asset bubbles. Banks’ reserve requirements will rise at least another percentage point within next six months after the latest half point increase announced on Friday last week, according to HSBC.
“Flash PMI data point to a meaningful slowdown in the industrial sector in February,” Qu Hongbin (屈宏斌), chief economist for China at HSBC, said in a statement. “It also implies that quantitative tightening is starting to filter through, yet more still needs to be done to check inflation.”
The Shanghai Composite Index rose 0.1 percent to close at 2,903.38 as of the 11:30am break in trading yesterday.
The yuan rose as much as 0.1 percent to 6.5658 per US dollar earlier in the day, the strongest level since China unified official and market exchange rates at the end of 1993, according to China Foreign Exchange Trade System in Shanghai.
The spot rate traded at 6.5664 as of 12:01pm.
Chinese authorities will probably continue to tighten monetary policy because of a continuing buildup in inflationary pressures, Qu said.
New export orders, a sub-index in the PMI, fell below 50 for the first time in six months, with employment also falling below that threshold, Qu said. A reading below 50 points to a contraction in activity.
Breakdowns of the sub-indexes were not included in the statement.
The HSBC Flash China Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 manufacturing companies in both state and private sectors.
The initial figure is based on 85 percent to 90 percent of the total responses to its monthly purchasing managers’ survey to be announced at the beginning of next month, HSBC said.
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