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 The flash Markit/HSBC Purchasing Managers' Index (PMI) fell to 49.6
in January from December's final reading of 50.5, dropping below the
50 line which separates expansion of activity from contraction.
The data is the first indication of sentiment in the 56.9 trillion
yuan ($9.4 trillion) economy, the world's second-largest, for the
new year.
"The marginal contraction of January's headline HSBC flash China
manufacturing PMI was mainly dragged by cooling domestic demand
conditions," said Qu Hongbin, chief economist for China at HSBC.
"This implies softening growth momentum for manufacturing sectors,
which has already weighed on employment growth. As inflation is not
a concern, the policy focus should tilt towards supporting growth to
avoid repeating growth deceleration seen in 1H 2013."
The flash PMI showed a faster rate of decrease in new export orders
and employment in January. The new orders index came in at 49.8, the
first contraction in six months.
Figures on Monday showed China's annual economic growth cooled to a
six-month low of 7.7 percent in the October-December quarter.
Momentum has slowed due to the government's shift towards
restructuring the economy and as exports stuttered.
While the economy narrowly missed expectations for full-year growth
to fall to a 14-year low in 2013, some economists say a further
cooldown will be inevitable this year as officials hunker down for
difficult reforms.
China wants to change tack by embracing sustainable and
higher-quality development instead.
That means reducing government intervention to allow financial
markets to have a bigger say in allocating resources, and promoting
domestic consumption at the expense of investment and exports.
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Full-year growth in 2013 was 7.7 percent, steady from 2012 and just
slightly above market expectations for a 7.6 percent expansion,
which would have been the slowest since 1999.
PMI surveys at the end of last year had confirmed slowing momentum,
with the HSBC/Markit one showing a three-month low and the
government's official PMI at a four-month low. Both cited weak new
export orders as one of the main reasons for the dip.
A Reuters visit to southern China's manufacturing heartlands this
month showed many factories have closed earlier than usual for the
upcoming lunar new year, the nation's biggest holiday, discouraged
by weak orders and rising costs.
The HSBC/Markit PMI is more weighted towards smaller and private
companies than the official one, which contains more large and
state-owned firms.
The final HSBC/markit manufacturing PMI for January is due on
January 30 and the official manufacturing PMI is set for release on
February 1.
(Reporting by Jonathan Standing; editing
by Kim Coghill)
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