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China’s manufacturing sector continues to contract, falling to its weakest level in 11 months, according to the HSBC Flash China Manufacturing PMI™ for July. The headline figure was 47.7, down from 48.2 in June.

Output, new orders and employment all declined at a faster rate, while new export orders decreased at a slower rate. Qu Hongbin, Chief Economist for Greater China and Co-Head of Asian Economic Research at HSBC, said: “The lower reading of the July HSBC Flash China Manufacturing PMI™ suggests a continuous slowdown in manufacturing sectors thanks to weaker new orders and faster destocking. This adds more pressure on the labour market.”

The Flash PMI™ reinforces the need to introduce additional fine-tuning measures to stabilise growth

Qu Hongbin,
Chief Economist for Greater China, HSBC

He added: “As Beijing has recently stressed to secure the minimum level of growth required to ensure stable employment, the Flash PMI™ reinforces the need to introduce additional fine-tuning measures to stabilise growth.”

The weaker PMI™ reflects a broader slowdown in China’s economy. Last month, HSBC Global Research cut its GDP forecast for China from 8.2 per cent to 7.4 per cent for 2013 and from 8.4 per cent to 7.4 per cent for 2014. Qu Hongbin said this reflected the fact that policymakers in Beijing were focusing on longer-term reforms rather than economic stimulus to underpin growth. He pointed out that the reforms will focus on structural problems in China, and added that the Chinese government was putting a greater emphasis on the “quality of growth over quantity”.

The Flash index is published about one week before the PMI™ and is typically based on approximately 85 to 90 per cent of total responses to the PMI™. An index reading above 50 signals expansion, while below 50 signals contraction.

July’s final PMI™ is due for release on 1 August.

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