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Chinese manufacturing shows no signs of rebounding

May 24, 2012
  • A shoe factory in southern China.
A shoe factory in southern China. (Nicole Liu )

BEIJING -- China's economy has yet to rebound from its startling slide last month, according to an informal survey of Chinese manufacturers released Thursday.

The preliminary HSBC Flash China Manufacturing purchasing managers index shrunk for the seventh consecutive month in May by registering 48.7, down from April's final reading of 49.3.

Readings under 50.0 represent a contraction. A final reading for May is to be released next week.

"Manufacturing activities softened again in May, reflecting the deteriorating export situation," said Hongbin Qu, an economist for HSBC. "This calls for more aggressive policy easing, as inflation continues to slow."

China has already indicated that it would boost liquidity and channel money to new infrastructure development. The government will also encourage private investment in the state-controlled energy sector. 

China's central bank cut the amount of money banks must hold in reserve earlier this month in response to a slew of surprisingly grim economic indicators registered in April, including flat import growth and the slowest industrial production growth in over three years.

"As long as the easing measures filter through, China will secure a soft landing in the coming quarters," Qu said.

The World Bank on Wednesday shaved its economic growth forecast for China this year to 8.2%, from 8.4%, which would mark the country's slowest pace of expansion in 13 years.

The bank noted that worsening conditions in Europe, the U.S. and China's property market could sink growth even further than expected.

Chinese Premier Wen Jiabao met with the country’s State Council on Wednesday and pledged to stabilize the economy.

"Some contradictions and problems still exist in the economy," Wen said, according to the official New China News Agency. "Downward pressure is increasing."


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