China factories expanded in May at their slowest pace in 10 months while price pressures eased, according to the latest purchasing managers' index.
The HSBC flash manufacturing purchasing managers' index (PMI) showed that China's vast manufacturing sector is gently easing rather than heading for a deep downturn as demand at home and abroad remained firm.
Data showed the flash PMI eased to 51.1 in May, the lowest since July last year, but still on track for expansion as a reading above 50 points to growth.
The index stood at 51.8 in April.
“Manufacturers continued to reduce inventories amidst slowing new business flows, leading to slower production growth at a 10-month low," says Qu Hongbin, chief China economist at HSBC.
Mr Qu stressed there is no need to worry about a "hard landing" in China because the PMI still suggested that factory output is growing about 13 per cent, and gross domestic product at nine per cent.
"Policy focus is still tilted towards taming inflation. We expect Beijing's tightening policy will continue in coming months," Mr Qu said.
Many analysts expect China's economic growth to slow modestly from a turbo-charged pace of 9.7 per cent in the second quarter. Such a moderation is exactly the outcome desired by Beijing in its bid to tame inflation.