China’s PMI Slides in June

The country's manufacturing activity has fallen to a nine-month low and Asian shares are losing ground in trade Thursday.

SHANGHAI — China’s manufacturing activity fell to a nine-month low in June, putting pressure on Asian stock markets on Thursday.

The country’s purchasing managers’ index, or PMI, fell to a nine-month low of 48.3 in June, according to preliminary data released by HSBC on Thursday, which comes about a week before Beijing will announce official PMI numbers. Readings below 50 on the 100-point scale indicate economic contraction. In May, HSBC said China’s PMI was 49.2. Official figures indicated last month’s PMI was 50.8, up from 50.6 in April.

China’s manufacturing sector is continuing to suffer from slowing export demand and weak domestic consumption, indicating that second quarter growth in the world’s second largest economy could be sharply lower than projected. 

Asian shares are losing ground in afternoon trade.  Tokyo’s Nikkei 225 closed the day shedding 1.8 percent, while Hong Kong’s Hang Seng index is shedding 2.7 percent. Singapore’s Straits times Index is currently down about 2 percent.


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China’s new export orders as well as employment fell at a faster rate in June, HSBC said. “Manufacturing sectors are weighed down by deteriorating external demand, moderating domestic demand and rising destocking pressures,” Qu Hongbin, HSBC chief economist for greater China, said in a statement.

Economists have said weakness in the manufacturing sector may leave officials with little choice but to inject more stimuli into the economy to prevent a slowdown that could further slow domestic consumption, negatively impact the labor market and lead to social instability. So far, Beijing has been resistant to the idea of using heavy-handed government involvement of the past to fuel economic growth. Leaders have instead stressed the need for overall economic reform to create more sustainable growth.

“Beijing prefers to use reforms rather than stimulus to sustain growth,” Qu said.  “While reforms can boost long-term growth prospects, they will have limited impact in the short-term.”

Beijing has set a growth target of 7.5 percent for the Chinese economy this year. HSBC has cut its 2013 gdp forecast for China to 7.4 percent from 8.2 percent.