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More evidence of slowing China growth

Tuesday, April 01 07:16:04

Persistent weakness in China's manufacturing sector reinforced fears of a sharper-than-expected slowdown at the start of 2014, and some government economists think authorities have already started boosting spending to put a floor under growth.

On Tuesday two surveys showed that manufacturing struggled in March, with activity at smaller, private firms contracting for a third month, adding to a run of disappointing data that has sparked speculation of imminent government-led stimulus.

The official purchasing managing index (PMI) edged up to 50.3 in March from 50.2 in February, pointing to slight expansion, but some economists said even that suggested weakness given activity typically picks up more after the Lunar New Year holidays in February.

The Markit/HSBC Purchasing Managers' Index (PMI), which focuses more on the private sector, fell to an eight-month low of 48.0 in March. The index has been below the 50 level since January, indicating a contraction this year.

"We're still in a subdued part of the cycle," said Louis Kuijs, chief China economist at the Royal Bank of Scotland.

"I still don't think the downward pressures are tremendous, but they are large enough for the government to really start to talk about the need to support growth."

In March, sources told Reuters the central bank was prepared to loosen monetary policy in order to keep the world's second-biggest economy growing at the government's target rate of 7.5 percent..

Premier Li Keqiang said last week the necessary policies were in place and the government would push ahead with infrastructure investment, seen by analysts as a signal of official concern about a slowing economy.

Economists at top government think-tanks believe some of this spending is already under way, as Li had outlined "policy reserves" in a report to parliament last month. ( C ) Reuters