Beijing: Chinese manufacturing contracted for the first time in six months in January, HSBC confirmed Thursday, raising questions over growth prospects for the world’s second-largest economy this year.
The British banking giant’s final reading of China’s purchasing managers’ index (PMI), which tracks manufacturing activity in factories and workshops, fell to 49.5 this month.
It was its lowest figure since July and fractionally below the preliminary 49.6 reading HSBC announced last week.
The index is a closely watched gauge of the health of the Asian economic powerhouse. A reading above 50 indicates growth, while anything below signals contraction.
“The deterioration of the headline PMI largely reflected weaker expansions of both output and new business over the month,” HSBC said. “Firms also cut their staffing levels at the quickest pace since March 2009.”
July’s figure of 47.7 was the last time it dropped below the critical point.
Qu Hongbin, the bank’s economist in Hong Kong, described it as “a soft start to China’s manufacturing sectors in 2014, partly due to weaker new export orders and slower domestic business activities during January”.
“Policymakers should pay attention to downside risks and pre-emptively fine-tune policy to steady the pace of growth if needed,” he added in a statement accompanying the data.
China’s week-long Lunar New Year holiday, which begins on Friday and during which the country’s shops, offices and factories largely shut down, could have an impact on the figures, analysts noted.
“We are cautious about reading too much into the figures at this time of year, as year-to-year shifts in the timing of Chinese New Year make seasonal adjustment less accurate,” said Julian Evans-Pritchard, of Capital Economics.
China’s economic growth came in at 7.7 per cent for 2013, maintaining its slowest expansion in more than a decade.