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China factory data disappoints

Beijing - China’s manufacturing sector grew less than analysts estimated last month, highlighting weakness in the economy, which could force the government to take extra measures to support growth.

The purchasing managers’ index (PMI) was at 50.4, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday.

Workers conduct final inspections on vehicles on the production line of a plant operated by Dongfeng Peugeot-Citron Automobile in Wuhan, China. Data released on Thursday showed Chinese manufacturing growth last month was lower than expected. Credit: Bloomberg

It was less than the 50.5 analysts had expected and compares with March’s 50.3. A number above 50 signals expansion.

An index of export orders fell to 49.1 from 50.1 in March.

This weakness in export orders may make it harder for Premier Li Keqiang to avoid a deeper slowdown after property construction plunged in the first quarter and economic growth cooled.

China’s gross domestic product (GDP) is projected to expand 7.3 percent this year, the weakest pace since 1990, as the government reins in credit.

“We continue to expect growth to slow,” said Zhang Zhiwei, the chief China economist at Nomura Holdings in Hong Kong.

“We expect the government to loosen fiscal and monetary policies in the next few months,” he said, adding that banks’ reserve ratios might be reduced this month or next and then again in the third quarter.

Ahead of the data, Société Générale analysts said a reading of 50.4 would indicate that growth momentum remained “soft” and an economic slowdown would continue in the second quarter.

GDP rose 7.4 percent in the January-to-March period from a year earlier.

China’s State Council on Wednesday pledged extra efforts to support trade, including through financing and export rebates, with Li saying the situation was “severe and complicated”.

The State Council last month outlined a package of spending on railways and housing, and tax relief to support growth. In addition, the central bank lowered the reserve requirement ratio for some rural banks by as much as 2 percentage points.

Almost all Chinese provinces failed to meet their growth targets in the first quarter even after scaling back their ambitions to rein in debt and curb pollution.

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