InvestmentsMay 23 2013

China faces pressure after poor data forecast

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ByEleanor Lawrie

China is facing renewed weakness in its manufacturing sector, according to flash data estimates, adding pressure on the government to review monetary policy.

The HSBC/Markit flash data estimates reveals the country’s manufacturing sector looks set to hit a seven-month low of 49.6 on the Purchasing Manufacturers’ index (PMI), which measures business activity and sentiment.

This is the first time since October last year that a reading of less than 50 has been recorded, which indicates a deterioration.

“Today’s sub-50 reading on the flash PMI will shake the confidence of China’s policymakers, who have remained sanguine in the face of slow growth so far this year,”economists Mark Williams and Qinwei Wang at Capital Economics said.

“We suspect they will resist the temptation to inject further stimulus since this would heighten the risk of financial instability and because there is only limited evidence of weakness in the labour market. But efforts to rein in credit growth may be toned down.”