Hong Kong () - Chinese manufacturing activity extended its decline in December, as production at factories and the volume of new orders generated eased from the previous month, according to the preliminary reading of an HSBC survey, released Thursday.
HSBC’s so-called “flash” Purchasing Managers’ Index for the month printed at 49, staying below the threshold of 50 that separates expansion and contraction.
The measure was, however, not as bad as November’s final PMI reading of 47.7, implying manufacturing activity was cooling at a slower rate than in October.
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HSBC said that while it’s good news that the pace of slowdown has stabilized in December, partly in response to the People’s Bank of China’s 0.5 percentage point reduction in major banks’ reserve requirements, the bad news was that domestic demand remained weak in the mainland Chinese economy.
The Chinese central bank had last month announced a reduction in large commercial banks’ reserve requirement ratio to improve liquidity in the banking system, which many economists said marked the beginning of a policy relaxation stance.
“China’s economy still faces notable downside risks from slowing exports and the further weakening of property-market activity that is yet to come,” said Qu Hongbin, co-head of Asian economics research at HSBC.
“China’s government can and should ease more aggressively on both the fiscal and monetary fronts to stabilize growth and jobs. ... Hard landings should be avoided, as long as easing measures filter through in the coming months,” Qu said.
Chinese and other stock markets in Asia, which opened Thursday on a weak note in the wake of a sell-off in global markets, remained on a downward slope after the flash PMI data, which is one of the first indicators of China’s economic conditions during a given month.
The flash PMI number is based on the responses of 85% to 90% of the total respondents in a survey.
The Shanghai Composite Index CN:000001 -2.14% shed 1.7% to 2,189.77 in afternoon trading, looking all set to end lower for a sixth straight session. Hong Kong’s Hang Seng Index HK:HSI -1.79% dropped 2.3% to 17,925.58, Australia’s S&P/ASX 200 AU:XJO -1.21% gave up 1.2% to 4,139.80 and Japan’s Nikkei Stock Average JP:NIK -1.66% shed 1.6% to 8,379.82.