China’s Manufacturing Expands at Slower Pace, Survey Says

A private gauge of Chinese manufacturing declined last month, adding to signs that a growth slowdown will persist in the world’s second-biggest economy.

The final April reading of 50.4 for a Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with 51.6 for March and the preliminary reading of 50.5 given April 23. A number above 50 indicates expansion.

The drop follows a fall in an official manufacturing index reported yesterday and lower-than-estimated gains in industrial output in the first quarter. The factory slump joins weakness in export demand and property-market overheating as risks to growth after expansion unexpectedly slowed in the first three months of the year.

“The slower growth of manufacturing activities in April confirmed a fragile growth recovery” in the broader economy, Qu Hongbin, chief China economist with HSBC in Hong Kong, said in a statement. “The looming deflationary pressures also suggest softer overall demand conditions. All this is likely to weigh on the labor market, which is likely to invite more policy responses in the coming months.”

The median estimate of 12 analysts in a Bloomberg News survey was for a reading of 50.5.

The benchmark Shanghai Composite Index dropped 0.5 percent at 1:33 p.m. local time, in the first trading day following a three-day holiday.

Growth Goal

China may set a 7 percent target for economic growth next year, down from the 7.5 percent goal for 2013, Market News International reported, citing a person it didn’t identify who’s familiar with discussions on the State Council.

The nation’s five-year plan through 2015 sets a 7 percent goal, while Premier Li Keqiang said in March that the nation needs 7.5 percent annual expansion for the rest of the decade to meet its 2020 development goals.

A gauge of new orders showed growth at a five-month low and an output index rose at a weaker pace, according to today’s statement. A measure of new export orders showed a contraction, mirroring a drop reported yesterday by the China Federation of Logistics and Purchasing.

Manufacturers cut prices for a second month, according to the survey. The seasonally adjusted output prices index indicated the sharpest rate of discounting since August, and input prices also showed the quickest decline since September, HSBC said.

Machinery Profits

Machinery maker Sany Heavy Industry Co. said last week its net income fell 44 percent to 1.57 billion yuan ($255 million) in the first quarter while rival Zoomlion Heavy Industry Science & Technology Co. reported a 71.7 percent decline.

The government-backed Purchasing Managers’ Index for manufacturers had a reading of 50.6 last month, the National Bureau of Statistics and logistics federation said yesterday in Beijing. That compared with the 50.7 median forecast of analysts and a March reading of 50.9.

The HSBC survey covers a sample of more than 420 companies, and the government PMI survey has a sample base of 3,000 companies in 21 industry groups.

The economy expanded 7.7 percent in the first quarter, less than analysts’ forecasts and below the 7.9 percent pace in the final three months of last year.

The median estimate for second-quarter growth was 8 percent in a survey of 30 economists conducted April 18 to April 23, compared with an 8.2 percent median forecast of 31 analysts the previous month.

Expansion Forecasts

China’s economy may expand about 8 percent this quarter, according to estimates from the State Information Center reported in the China Securities Journal today. The Chinese Academy of Social Sciences is estimating growth of 8 percent for the year, the official Xinhua News Agency reported today.

The State Information Center, which is part of the National Development and Reform Commission, also said that potential risks are increasing in the financial system in part because of local-government debt, while the divergence in official export figures from industrial exports indicates that capital inflows are being disguised as trade.

Growth in Chinese industrial companies’ profits slowed in March, with net income increasing 5.3 percent from a year earlier, down from a 17.2 percent pace in the first two months, the NBS said April 27.

(Updates with growth-target report in seventh paragraph.)
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