China PMI Falls for First Time Since 2009

China’s manufacturing contracted for the first time since February 2009 as the property market cooled and Europe’s crisis cut export demand, a survey showed.

The Purchasing Managers’ Index fell to 49.0 in November from 50.4 in October, the China Federation of Logistics and Purchasing said in a statement today. The median estimate in a Bloomberg News survey of 18 economists was 49.8. A level above 50 indicates expansion.

The central bank last night announced the first cut in banks’ reserve requirements since 2008, moving two hours before the U.S. Federal Reserve led a global effort to ease Europe’s sovereign-debt crisis. The move will add about 370 billion yuan ($58 billion) to the financial system and more reductions may follow as the government seeks to support growth, Citigroup Inc. said.

Today’s report “clearly adds to the urgency for easing,” said Yao Wei, a Hong Kong-based economist with Societe Generale SA. “The PMI is showing weakness across the board and this would seem to be the reason the government cut banks’ reserve requirements. If this trend continues we should see another cut pretty soon.”

The Shanghai Composite Index (SHCOMP) fell 3.3 percent yesterday, the biggest decline in almost four months. India yesterday reported that its economy grew the least in two years and Thailand cut interest rates as a slowdown in Asia limits the region’s ability to support a faltering world recovery.

Weaker Demand

The manufacturing index compiled by the logistics federation and National Bureau of Statistics is based on a survey of purchasing managers in more than 820 companies in 20 industries.

A gauge of new orders contracted for the first time since January 2009 and the output index expanded at the slowest pace since the same month, today’s survey showed. New export orders fell below 50 for a second straight month.

JinkoSolar Holding Co. (JKS), a Chinese maker of solar panels, said last week third-quarter net income fell 74 percent from a year earlier on slumping prices. The company, based in eastern Jiangxi province, also cut its full-year shipment estimate by as much as 23 percent citing weaker demand from Europe.

“China’s growth will slow further over the next six months,” Li Wei, a Shanghai-based economist with Standard Chartered Plc said before the data. “If the deterioration in Europe and the U.S. accelerates in the first half of next year, the government will have to put maintaining growth as its top priority.”

To contact Bloomberg News staff for this story: Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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