China’s manufacturing activity this month contracted at its slowest pace in five months, indicating that Beijing’s easing measures were beginning to take effect, an independent survey showed yesterday.
Preliminary figures from HSBC’s closely watched purchasing managers’ index (PMI), which gauges nationwide manufacturing activity, hit a five-month high of 49.5 last month, the British banking giant said in a statement.
A PMI reading above 50 indicates expansion, while a reading below 50 points to contraction.
HSBC said the reading, which was higher than the 48.2 that HSBC recorded last month, indicated that government measures to boost economic growth were working.
“That said, the below-50 July reading implied demand still remaining weak and employment under increasing pressure,” Qu Hongbin (屈宏斌), a Hong Kong-based economist with HSBC, said in the statement.
“This calls for more easing efforts to support growth and jobs,” he added.
China’s GDP fell to a more than three-year-low of 7.6 percent in the second quarter, prompting the central bank to take the rare step of slashing interest rates for the second time since early last month.
It has also cut the amount of money banks must keep in reserve, aimed at stimulating lending, three times since December.
Qu said falling inflation gave Beijing leeway to introduce more policies to bolster growth, with “meaningful improvement” of the world’s second-largest economy expected in the coming months.
China’s consumer price index, the main measure of inflation, slowed to 2.2 percent last month, its lowest level in 29 months, according to official data.
HSBC will issue the final reading of this month’s PMI on Aug. 1.
Separately, Australia’s central bank chief yesterday played down fears of a significant slowdown in key trading partner China.
Australian Reserve Bank Governor Glenn Stevens said China’s economy was cooling in line with Beijing’s plans and was consistent with annual growth in “the seven to eight percent range.”
“The recent data suggest that, so far, this is a normal cyclical slowing, not a sudden slump of the kind that occurred in late 2008,” he said.
“To be sure, that is a significant moderation from the growth in GDP of 10 percent or more that we have often seen in China in the past five to seven years. But not even China can grow that fast indefinitely,” Stevens said.
Earlier “breakneck” growth in China had stoked inflation, overheated property markets and led to a “good deal of poor lending,” he said, adding that moderation was preferable if it allowed sustainable growth in the long term.