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Chinese manufacturing sector grew at a weaker rate in February, according to a private sector survey, as the continuing global economic conditions hurt external demand.
HSBC's preliminary manufacturing purchasing managers index (PMI) eased to its lowest in four months in February, to 50.4 from January's final reading of 52.3. A reading above 50 indicates growth in the sector.
Despite the retreat from the recent highs, analysts point out that the data need not raise concerns on the China's recovery efforts from the recent slowdown as the economy remains strong.
"The underlying strength of the Chinese growth recovery remains intact, as indicated by still expanding employment and the recent pick-up of credit growth," said Qu Hongbin, an economist at HSBC.
According to Crédit Agricole's senior economist Dariusz Kowalczyk, quoted by Marker Watch, the data indicates that China could be at the peak of its economic cycle and is expected to be well on track to achieve about 8.5 percent gross domestic product (GDP) growth this year.
Some analysts also suggest that the data could be impacted by the Lunar New Year calendar which usually distorts readings in the first two months of the year.
The flash PMI underscored the weakness in China's export markets. A sub-index that tracks export orders eased to 49.8, slightly below the 50-point mark. Weak external demand has been China's major cause of concern for the past two years, weighing the overall economic growth lower.
In January, China's exports had climbed to a 21-month high, but analysts suggest that the country's shipment woes could persist as the US and European Union economic concerns continue.
Domestic demand continued to remain strong with a sub-index that tracks new orders reading well above the 50 mark. As exports dwindled, the Chinese government had looked at efforts to boost domestic consumption.
China's incoming President Xi Jinping is expected to officially take office early next month. The new regime is expected to continue its efforts to boost growth, offering stimulus measures in tandem with economic conditions.