|
 Three separate surveys showed Chinese companies shed jobs last month
as they struggled with soft demand and deflationary pressures,
suggesting that economic growth may have slipped below 7 percent in
the first quarter of 2015, which would be the weakest in six years.
"We expect first-quarter growth to drop to 6.8 percent and the
government might start easing policies significantly in the second
quarter," said Zhang Zhiwei, an economist at Deutsche Bank in Hong
Kong, adding that the central bank may relax banks' reserve
requirement ratio (RRR) as early as this week or next.
"Growth faces headwinds from the property slowdown and a fiscal
slide," said Zhang, referring to a fall-off in government revenues
that many worry could further dampen economic growth by crimping
investment.
Many economists also see further interest rate cuts later this year
and additional measures to help the weakest sectors such as the
housing market. Regulators on Monday cut downpayment requirements
for home buyers for the second time in six months.
The last time China reduced the amount of deposits that banks must
hold as reserves was on Feb. 4, three days after an official survey
of the factory sector showed activity unexpectedly shrank to a
2-1/2-year low.
The official Purchasing Managers' Index (PMI) released on Wednesday
was not as dire, but indicated that activity was tepid at best.
It edged up to 50.1 in March from February's 49.9, the National
Bureau of Statistics said, stronger than a Reuters poll forecast of
49.7, but barely above the 50-point level that separates an
expansion in activity from a contraction.
In another sign that businesses were facing lackluster demand, a
survey of China's services sector showed the official
non-manufacturing PMI cooled slightly to 53.7 from February's 53.9,
hugging a one-year low.
Both the factory and services PMIs showed companies continued to
reduce staff last month. While the labor market remained
surprisingly resilient for much of 2014, some economists believe any
marked deterioration in coming months could prompt more aggressive
easing measures from Beijing.
DEFLATION RISK
The surveys also suggested that deflationary pressures did not let
up last month, pressuring firms' profit margins even as sales slow
and competition heats up.
Producer prices in factories fell again in March for at least the
13th consecutive month, while the final prices of services charged
by firms dropped last month.
Wary of following in Japan's footsteps, where two decades of falling
prices have stifled economic growth, Chinese policymakers have
signaled that they are ready to act to avoid a bruising deflationary
cycle.
Central Bank Governor Zhou Xiaochuan warned on Sunday that the
country needs to be more vigilant about the impact of declining
prices.
[to top of second column] |
SIZE MATTERS
Weighed down by a property downturn, factory overcapacity and high
levels of local debt, China's economic growth is expected to slow to
a quarter-century low of around 7 percent this year from 7.4 percent
in 2014.
Even the services sector, which was the lone bright spot in China's
slowing economy last year, appears to be finally succumbing to the
broader economic downdraft, judging by the recent patchy performance
of the services PMI.
Other data this year have indicated that the economy has lost
momentum despite two interest rate cuts since November, a reduction
in banks' reserve requirements, and repeated attempts by the central
bank to reduce financing costs.
Indeed, a smaller, private survey of China's manufacturing sector
showed on Wednesday that it contracted in March after two months of
recovery.
The final HSBC/Market China Manufacturing PMI came in at 49.6,
slightly higher than a preliminary "flash" reading of 49.2 but still
below 50.
"The latest data indicate that domestic and foreign demand remains
subdued amid weaker market conditions," said Annabel Fiddes, an
economist at Markit.
The official PMI looks at larger, state-owned firms, while the HSBC
version focuses on small and mid-sized firms which are facing
greater stresses such as high financing costs.
True enough, the official manufacturing PMI also showed that the
downturn was worst felt among the smallest factories.
The PMI for big factories rose to 51.5 in March, while the index
slipped to 48.3 for mid-sized manufacturers, and fell by the
greatest margin to 46.9 for small workshops.
(Additional reporting by Kevin Yao; Editing by Kim Coghill)
[© 2015 Thomson Reuters. All rights
reserved.] Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
