China’s manufacturing activity worsened this month, with HSBC’s closely watched purchasing managers’ index (PMI) hitting a seven-month low, the bank said yesterday, signaling more weakness in the world’s second-largest economy.
The British banking giant’s preliminary PMI for the month came in at 49.5, below the break-even point dividing expansion and contraction, the bank said in a statement.
The result, compiled by information services provider Markit, was lower than last month’s final reading of 50 and the weakest result since May’s 49.4. This month’s reading also marked the first move into the contraction range in seven months.
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“The manufacturing slowdown continues in December and points to a weak ending for 2014,” HSBC chief economist for China Qu Hongbin (屈宏斌) said in the statement. “The rising disinflationary pressures, which fundamentally reflect weak demand, warrant further monetary easing in the coming months.”
HSBC will publish its final reading for this month on Jan. 2, it said.
China’s economy expanded 7.3 percent in the third quarter, the government said in October, lower than the 7.5 percent of the previous three months and the slowest since 2009, at the height of the global financial crisis.
It has showed continued weakness in the current fourth quarter.
The People’s Bank of China last month cut interest rates for the first time in more than two years to jolt slowing growth, but analysts say that further easing steps are needed.
The government on Friday last week announced that industrial output expanded at its slowest pace in three months last month, while retail sales and fixed asset investment data also pointed to weakness.
Meanwhile, government data yesterday showed that foreign investment into China accelerated last month, despite a worsening slowdown in the world’s second-largest economy and concerns over business risks.
Foreign direct investment (FDI) — which excludes financial sectors — rose 22.2 percent year-on-year, the Chinese Ministry of Commerce said, totaling US$10.36 billion.
The figure compares with an increase of 1.3 percent in October to US$8.53 billion. FDI had hit a four-year-low in August of US$7.2 billion.
For the first 11 months of the year, FDI amounted to US$106.24 billion, the ministry said, an increase of 0.7 percent year-on-year.
“Investment from major countries and regions was generally stable,” ministry spokesman Shen Danyang (沈丹陽) said.
However, investment by Chinese companies overseas fell last month for the second consecutive month, the ministry said.
Overseas direct investment (ODI) was down 26.1 percent year-on-year last month at US$7.92 billion and stood at US$89.8 billion for the first 11 months, up 11.9 percent.
“After analysis, we think FDI and ODI will be close this year,” Shen said at a regular briefing, adding that monthly figures are “volatile” and that China “does not seek to become a capital exporter.”
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