China manufacturing down for 11th month

China’s manufacturing activity shrank for an 11th straight month in September, HSBC said Saturday, adding to pressure on Beijing to provide fresh stimulus to boost the world’s second largest economy.

The final reading of the purchasing managers’ index, or PMI, released by the British banking giant hit 47.9 this month, a mild improvement from a final reading of 47.6 in August, HSBC said in a statement.

The index is closely watched as it gauges nationwide manufacturing activity, a key sector of the Chinese economy. A reading below 50 indicates a contraction in manufacturing, while a reading above 50 indicates expansion.

China’s official PMI figure for August released earlier this month hit a nine-month low of 49.2.

The final HSBC reading was slightly above the preliminary PMI of 47.8, announced on September 20, and may ease concerns over China’s sharp slowdown.

The latest figure marked nearly a year of continuous contraction since November, underscoring broader economic weakness and shrinking demand in key overseas markets.

New export orders fell at the fastest rate in 42 months, HSBC said, indicating that economic weakness in major export markets such as the United States and Europe were continuing to weigh on the Chinese economy.

Qu Hongbin, HSBC’s Hong Kong-based chief economist for China, said that manufacturing was probably hitting its low-point but that Beijing still needed to introduce further stimulus to help the economy.

“Chinese manufacturing growth is likely to be bottoming out,” he said in a statement. “However, the sharper contraction of new export orders and the lingering pressures on job markets mean that Beijing should step up easing to support growth and employment,” he added.

“Fiscal measures should play a more important role in the coming months”.

Authorities this year have tried to boost the economy with interest rate cuts and by lowering the amount of cash banks must keep on hand in a bid to spur the kind of lending that could stimulate stronger growth.

Premier Wen Jiabao said this month that China is still likely to achieve its annual economic growth target of 7.5 per cent. Even so, that would mark a significant slowdown from 9.3 per cent growth in 2011 and 10.4 per cent in 2010.