China manufacturing edges upward

Activity in China’s manufacturing sector grew slightly in February, according to a key preliminary index of nationwide manufacturing activity.

The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) increased to a four-month high of 50.1 in February. The figure for January was 49.7.

All readings above 50 represent expansion in the sector, while readings under 50 represent contraction. The Flash PMI is based on 85 per cent to 90 per cent of total responses to HSBC's PMI survey each month.

“Domestic demand firmed while new export orders contracted for the first time since April 2014. Both input and output prices remain in contraction,” said Hongbin Qu, Chief Economist, China & CoHead of Asian Economic Research at HSBC.

“Today's data point to a marginal improvement in the Chinese manufacturing sector going into the Chinese New Year period in February.”

“However, domestic economic activity is likely to remain sluggish and external demand looks uncertain. We believe more policy easing is still warranted at the current stage to support growth.”

As The Wall Street Journal reports, given that Chinese New Year celebrations have just ended, the result was received with caution. Although the holiday is factored into the index, it tends to still affect many economic indicators.

 According to analysts, recent changes in Beijing’s monetary policy have probably channelled more capital into domestic investment.

Reuter reports that the modest growth in manufacturing was accompanied by falls in input and output prices. In addition, factory employment decreased for the 16th month in a row, amid signs that China is falling out of favour among manufacturers.

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