China's Manufacturing Activity Slows in May

The government says that the economy will continue to grow but at a moderately slower pace.

As the government moves to stop the economy from overheating, manufacturing activity in China slowed in May data showed on June 1.

The HSBC China Manufacturing PMI, or purchasing managers' index, fell to 52.7 last month from a revised figure of 55.2 in April, an 11-month low, indicating the recovery of China's manufacturing sector lost some momentum, the bank said.

"The slowdown in the headline manufacturing PMI suggests that the overheating risk is likely to ease as tightening measures filter through," said HSBC chief China economist Qu Hongbin. "That said, we see robust economic growth without double-dip risks not least because of massive existing infrastructure investment and resilient private consumption."

A separate survey released by a government agency on June 1 showed manufacturing activity had dropped to 53.9 in May from 55.7 in April.

The government survey predicted the Chinese economy would continue to grow rapidly, but at a moderately slower pace. "Changes in the May PMI index is likely one of the omens of the economy stabilizing from rapid recovery," government analyst Zhang Liqun said.

Asian shares were lower on June 1 amid concerns that growth of the world's third-largest economy may slow down, impeding the region's recovery as China is a major export destination for several regional economies. Shanghai closed 0.92% down, Tokyo's Nikkei fell 0.58%, and Hong Kong's Hang Seng Index lost 1.36%.

Beijing has announced a series of measures to rein in bank lending to calm inflationary pressures and avoid a damaging bubble in the real estate market. China's economy grew a blistering 11.9% in the first quarter of 2010, fuelling fears the booming economy was at risk of overheating.

Manufacturing activity in May has been slower than in April every year for the past five years, the bank said in a research report. "While we believe it is important to watch out for downside risks to growth ... the macro picture is looking more benign than it was 2-3 months ago," the bank said. "Growth remains at a robust level while inflationary pressures in the pipeline have been moderating."

Copyright Agence France-Presse, 2010

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