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Business

Mixed signals from China economy

Economists keep receiving ambiguous signals from the Chinese economy, with the leadership in Beijing keen on fueling domestic consumption rather than pursuing unprofitable mega investment projects.

China's factory activities edged up to a six-month high in May, the official Purchasing Managers' Index (PMI) showed Monday.

The National Bureau of Statistics (NBS) said the widely watched barometer climbed to 50.2 points, up only slightly from the 50.1 points logged in the previous months. A reading above 50 indicates growth on a monthly basis.

But the non-manufacturing PMI slipped to 53.2 points, down from 53.4 points in April, marking a trough not seen since December 2008.

Looking for the right balance

Chinese export demand shrank, prompting companies to shed jobs. That kept alive worries about a protracted economic slowdown in the world's second-largest economy.

"China's economy still faces strong headwinds," ANZ Bank said in a statement.

Monday's data gave rise to fresh speculation that the Chinese authorities might soon roll out more stimulus, despite having cut interest rate three times in six months.

"We forecast more aggressive policy easing, including a 50 basis-point reserve ratio cut in the coming weeks," HSBC told Reuters. With the economy cooling, China has fought persistent deflationary pressures which in turn has kept real interest rates stubbornly high.

hg/cjc (AFP, Reuters)

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