Chinese manufacturing sector expanded in January, allieving some fears that the country is headed for a hard economic landing as Western consumer demand wanes.
Part of the growth, however, was caused by manufacturers increasing production before the slowdown for Lunar New Year celebrations.
The official PMI published by the China Federation of Logistics and Purchasing rose to 50.5 in January compared to 50.3 in December as new orders hit a three-month high of 50.4. But low demand from Europe saw the new export order sub-index fall for the fourth consecutive month to 46.9 from from 48.6 in December.
A rival PMI produced by HSBC and more weighted toward tracking small and medium-sized businesses measured 48.8 in January, a slight improvement from 48.7 in December.
The Chinese government has pledged to boost the economy by introducing tax incentives and easier access to lending for small and medium-sized companies. The government hopes the action will help ease the pressure many smaller companies have faced from tighter lending and lower exports.
Qu Hongbin, HSBC chief China economist, said more government support was needed. "The final results of January's PMI survey confirmed the still weak growth momentum of manufacturing activities into the New Year," he said. "This calls for more aggressive easing measures to support growth, given that inflation is no longer a concern.”
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