China manufacturing activity shrinks in February – HSBC

22 February 2012 04:17  [Source: ICIS news]

SINGAPORE (ICIS)--China’s manufacturing activity shrank for the fourth consecutive month in February as there were fewer new export orders in the wake of the eurozone debt crisis, UK-based banking firm HSBC said on Wednesday.

The preliminary HSBC purchasing managers’ index (PMI) stood at 49.7 in February compared with 48.8 in January, the bank said.

A figure above 50 indicates an expansion, while a figure below 50 represents a contraction.

“Growth remains on track for a slowdown, despite the marginal improvement in the headline flash PMI led by quickened production after the Chinese New Year,” said Qu Hongbin, HSBC’s chief economist for China.

“With a meaningful rebound of domestic demand not in sight, external weakness is starting to bite, adding more downside risks to growth,” Qu said.

“The PBoC [People’s Bank of China], after delivering this year’s first RRR [reserve requirement ratio] cut, should step up policy easing as inflation pressures continue to ease,” Qu added.

The PBoC on 18 February cut its reserve requirement ratio by 50 basis points to 20.5 percent in a move to promote economic growth, now that inflation has started to taper off.

With effect from 24 February, the reserve requirement ratio for banks, or that portion of deposit that must be parked with the central bank, will be reduced to 20.5% for major financial institutions and to 17% for small and medium-sized financial institution.

The Chinese government’s release of the final PMI reading for February this year is due on 1 March.

By: Nurluqman Suratman

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