Chinese manufacturing slumps to 11-month low

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Chinese manufacturing activity has slowed to its weakest level in 11 months, a closely watched survey shows, adding to pressure for the country’s government to implement fresh stimulus measures.

The HSBC Flash China Manufacturing Purchasing Managers’ Index fell to 47.7 points in July, down from 48.2 in June and remaining below the 50-point mark that indicates a contraction in activity.

China has returned to the headlines in recent months after its economy started to slow. July’s Bank of America Merrill Lynch Global Fund Manager Survey showed a so-called hard landing in China is asset allocators’ biggest tail risk, with 52 per cent citing this as their largest concern – up from 32 per cent last month.

HSBC’s survey, which is published one week before the final data and use 85 to 90 per cent its total responses, suggests that Chinese factory output, new orders, employment and stocks of finished goods all declined over the course of July.

HSBC chief economist for China and co-head of Asian economic research Hongbin Qu said: “The lower reading of the July HSBC Flash China Manufacturing PMI suggests a continuous slowdown in manufacturing sectors thanks to weaker new orders and faster destocking. This adds more pressure on the labour market.

“As Beijing has recently stressed to secure the minimum level of growth required to ensure stable employment, the flash PMI reinforces the need to introduce additional fine-tuning measures to stabilise growth.”

This week, Chinese premier Li Keqiang reassured the markets after saying the slowest growth policymakers in the world’s second largest economy will tolerate is 7 per cent, leading to hopes that the government is on the brink of unveiling new stimulus.