China Manufacturing Gauge Signals Risk of Deeper Slowdown
Bloomberg News
China's manufacturing contracted in April for a fourth month, according to a private survey, signaling the risk of a deeper slowdown in an economy already projected to expand this year at the slowest pace since 1990.
A purchasing managers’ index was at 48.1, HSBC Holdings Plc and Markit Economics said in a statement today. That compared with 48 the previous month, a preliminary reading of 48.3 and a 48.4 median estimate from analysts surveyed by Bloomberg News. Numbers below 50 indicate contractions.
Property construction plunged in the first quarter and economic growth cooled, showing the challenge for Communist Party leaders trying to set a floor under growth while rolling out changes such as an increased role in the economy for private investment. Gross domestic product is projected to expand 7.3 percent this year as the government reins in credit, according to a Bloomberg survey, compared with an official target of about 7.5 percent.
'Beijing has introduced more reform measures which could support growth by inducing more private sector investment,' Qu Hongbin, chief China economist for HSBC in Hong Kong, said in a statement. 'We think bolder actions will be required to ensure the economy regains its momentum.'
The Australian dollar and Asian stocks fell following the report. The State Council has outlined a package of spending on railways and housing and tax relief to support growth and pledged extra efforts to support exporters. The central bank has also lowered the reserve-requirement ratio for some rural banks by as much as 2 percentage points.
Railway Spending
China Railway Corp. plans to increase this year's investment to more than 800 billion yuan ($128 billion) from a previously announced 720 billion yuan, financial news provider Caixin reported on its website last week, citing a videoconference the company held on April 30. The amount had already been raised twice this year from an original 630 billion yuan to 700 billion yuan and then to 720 billion yuan, Caixin said.
Today's number compared with a reading of 50.4 in a manufacturing index released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing.
Almost all Chinese provinces failed to meet their growth targets in the first quarter even after scaling back their ambitions as the government instructs officials to focus on reining in debt and curbing pollution.
Thirty of 31 provinces and municipalities reported missing their goals, with the biggest shortfall in northeastern Heilongjiang, where an expansion of 4.1 percent compared with an 8.5 percent target for the year. Most localities' targets are lower than in 2013.
To contact Bloomberg News staff for this story: Paul Panckhurst in Beijing at ppanckhurst@bloomberg.net
To contact the editors responsible for this story: Stephanie Phang at sphang@bloomberg.net; Paul Panckhurst at ppanckhurst@bloomberg.net; Colin Keatinge at ckeatinge@bloomberg.net Scott Lanman
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