China manufacturing contracts sharply | Business| Economy and finance news from a German perspective | DW | 04.05.2015
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China manufacturing contracts sharply

Activity in China's factories slowed markedly in April, according to a leading index. It provides further evidence of weakness in the world's number-two economy, which has stopped generating growth at all costs.

HSBC's April Purchasing Managers' Index (PMI) for China, compiled by Markit and seen as a barometer for the state of the world's second biggest economy, showed the sharpest contraction in a year.

It fell to 48.9 from 49.6 in March, worse than a preliminary reading of 49.2 released in late April and below a reading of 50, which is considered the break-even point. A reading below 50 indicates contraction, a reading above 50 signals expansion.

The report shows new orders declined at the fastest rate in a year while production levels stagnated. HSBC's index comes after an official survey released last Friday found that manufacturing activity remained at 50.1, unchanged from March.

Sluggish domestic demand stalled new business in particular, in a further sign of weakness in the Chinese economy.

"The PMI reading indicates that more stimulus measures may be required to ensure the economy doesn't slow from the 7 percent annual growth rate seen in Q1 [first quarter - the ed.]," Markit economist Annabel Fiddes said in a statement.

Authorities have stepped up stimulus efforts, including announcing two interest rate cuts since November and twice reducing the amount of cash banks must keep in reserve.

Compared with the official reading, the HSBC survey looks more at smaller enterprises and uses a smaller sample.

ng/hg (AFP, AP)

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