Macroeconomic indicators - China manufacturing sees sizable slowdown

China Daily quoted HSBC Holdings PLC said China manufacturing activities stagnated in June in response to the 10 months of consecutive tightening measures.

Analysts said it is too early to say whether the world's second-largest economy will suffer a hard landing.

According to the HSBC report HSBC Purchasing Managers' Index dropped to an 11-month low of 50.1 in June compared with the final official reading of 52 in May indicating a sizable slowdown in the country manufacturing growth.

The HSBC PMI is published monthly by HSBC approximately one week before the China Federation of Logistics and Purchasing releases the final PMI. A reading above 50 means an expansion in the manufacturing sector while a reading below 50 indicates contraction.

Mr Qu Hongbin HSBC chief economist of China and co-head of Asian Economic Research said that the government's tightening measures and the decreasing demand from external markets led to a decline in the Chinese manufacturing sector.

He said that "The ongoing inventory de-stocking also slowed the output growth."

China consumer price index key indicator of inflation jumped to 5.5%YoY in May a new peak in almost three years and the central bank raised the required reserve ratio for commercial banks the sixth time this year on June 20.

Under the tight policies, the country's economic growth showed a continuous slowdown since April. The official PMI was 52.9 in April and 53.4 in March.

Mr Wang Jun an economist at the China Center for International Economic Exchanges, a government think tank said this continued drop in the HSBC PMI indicates that the government measures to tame high inflation have taken effect.

He said the tightening monetary policies may not ease in the short term because the nation's inflation is likely to climb higher in the future. He predicted the CPI figure to exceed 6%YoY in June. He added that although the HSBC PMI declined, it still showed an expansion in the manufacturing sector but at a slower rate.

Mr Wang said "I don't worry about a hard landing. The second quarter GDP is likely to stay above 9%."

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