Friday, January 03, 2014

Chinese Factory Data Suggest Slowdown, but not Economic Contraction

China's factory activity slowed in December, official and private manufacturing surveys showed, reinforcing views that growth in the world's second-largest economy moderated in the final quarter of 2013.

The final HSBC/Markit manufacturing Purchasing Managers' Index (PMI) slipped to a three-month low of 50.5 in December from 50.8 in November. Thursday's reading was unchanged from a preliminary figure issued last month.

The private survey was consistent with the government's PMI, which on Wednesday dipped to a four-month low 51.0. Both measures remained above the 50 point level that separates expansion from contraction.

"The economy is still growing, no doubt, but the growth momentum has weakened," said Yao Wei, economist at Societe Generale in Hong Kong.

"The major factors that had helped drive the strong recovery in Q3 and the first half of Q4, such as restocking and property construction, has somewhat softened towards the end of the year," she added.

Beijing has said it will accept slower growth as it tries to reshape the economy towards more sustainable growth, based on consumer demand, after three decades of breakneck expansion led by exports and credit.

Top leaders have pledged reasonable growth in 2014, and sources at top government think tanks told Reuters they expect a growth target of 7.5 percent, the same as for 2013.

The HSBC/Markit PMI is more weighted towards smaller and private companies than the official one, which contains more large and state-owned firms.

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