China's factory output falters

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China's factory output falters

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Chinese factory activity shrank again in December according to a survey of company purchasing managers (PMI) carried out by HSBC.

New export orders were down, particularly from Europe and the US — China’s top overseas markets.

Domestic demand also slackened.

Economists see Beijing introducing more pro-growth policies with China’s central bank relaxing rules on the amount of cash banks must hold as reserve.

The official PMI, due to be published on Sunday, is expected to paint a similar picture, suggesting the world’s second-largest economy is finishing 2011 on a weak note, in tandem with the global economic outlook.

“While the pace of slowdown is stabilising somewhat, weakening external demand is starting to bite,” said Qu Hongbin, China economist at HSBC.

“This, plus ongoing property market corrections, adds to calls for more aggressive action on fiscal and monetary fronts to stabilise growth and jobs, especially with prices easing rapidly.”

He said China would avoid a hard economic landing so long as policy easing measures filtered through in coming months.