Chinese manufacturing growth slows

Chinese factory activity grew at its slowest pace in 28 months in June as the number of new orders dropped off.

Production was affected by weaker global demand and greater restrictions on lending imposed on banks by the Beijing authorities.

Although the moderation in activity did not point to a sharp decline in Chinese economic growth for now, the figures were slightly worse than forecast.

As a result, some analysts predicted China may be less aggressive in tightening monetary policy conditions later this year.

The official purchasing managers’ index (PMI), designed to provide a snapshot of conditions in China’s vast manufacturing sector, fell to 50.9 in June, below expectations for a reading of 51.3 and down from 52 in May, the China Federation of Logistics and Purchasing said on Friday. The 50-point level demarcates expansion from contractions.

A separate PMI survey by HSBC showed growth in overall factory production came close to stalling in June, confirming preliminary findings released last week. Its PMI reading stood at 50.1, with output falling for the first time since July 2010 amid lacklustre demand and power shortages.

With the US economy sputtering and Europe fighting a debt crisis, global investors are especially sensitive to any change in activity in China.

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