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China manufacturing growth slows

03-05-2011
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in 

China's manufacturing growth slowed in April, according to the latest industry survey.

Economists says the slow down is a direct result of the government's tightening efforts which has hit the world's second-largest economy more heavily than expected.

The official purchasing managers' index for China fell to 52.9 in April from 53.4 in March, well shy of market forecasts for an increase to 54.0.

The survey, which is designed to provide a snapshot of conditions in China's vast manufacturing sector, was largely in line with a separate PMI sponsored by HSBC published on Friday that clung near a seven-month low at 51.8 in April.

With inflation running at its fastest in nearly three years, China has taken a series of policy actions to rein in prices, raising interest rates and banks' required reserves multiple times, ordering banks to lend less and speeding up the pace of currency appreciation.

On the positive side of the ledger, the official PMI showed that these steps have at least partially hit the mark.

A sub-index measuring input prices fell to 66.2 in April, a seven-month low, from 68.3 in March.

But the survey also flashed worrying signals for the global economy, which has become increasingly reliant on Chinese demand as a source of growth with the US, Europe and Japan still struggling to recover from the financial crisis.

"Overall, the PMI shows there is still a possibility that the Chinese economy may slow down, especially as falling demand growth leads to adjustments in inventories, increasing the possibility of slowing economic growth," says Zhang Liqun, a government researcher.

The new orders sub-index weakened to an eight-month low of 53.8 in April from 55.2 in March. Much of that drop was driven by slower growth in export orders, whose sub-index dipped to 51.3 from 52.5.

"The fall may show that export growth will continue to slow down," Zhang said in a comment on behalf of the China Federation of Logistics and Purchasing, which compiles the official PMI.

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