China's
manufacturing activity slumped to its lowest level in 32 months in November,
banking giant HSBC said Wednesday, renewing fears the Asian powerhouse is
losing steam amid global economic woes.
The news comes just days after Vice Premier
Wang Qishan, China's top finance official, gave a dire warning that the global
recession was here to stay and would impact the export-dependent economy due to
weakening external demand.
The preliminary HSBC purchasing managers'
index (PMI) dropped to 48 in November -- the lowest since March 2009 --
compared with 51 in the previous month, HSBC said in a statement.
A reading above 50 indicates the sector is
expanding while a reading below 50 suggests a contraction. The final figure
will be released on December 1.
HSBC chief China economist Qu Hongbin said he
expected cooling domestic demand and weakening external demand for China's
exports heralded a further slowdown in production in coming months.
But he added China had more room to ease its
tight monetary policy to boost a slowing domestic economy as inflation was now
in check.
Beijing, anxious about high inflation, has
pulled on a variety of levers to curb price rises in the past year, including
restricting the amount of money banks can lend and hiking interest rates.
The measures appear to have worked, as the
nation's inflation slowed sharply in October, with the consumer price index
rising 5.5 percent year-on-year, marking the slowest pace since May as food
prices fell.
"It will leave more room for Beijing to
step up selective easing measures, which should gradually filter through to
keep China on track for a soft landing," Qu said in the statement.
China's economic growth eased to 9.1 percent
in the third quarter from 9.5 percent in the second quarter, as government
efforts to tame inflation and economic turbulence in Europe and the United
States curbed activity.
At the weekend, Wang warned that China needed
to fix "structural problems" in its financial system to cope with a
global downturn that threatens the world's second largest economy.
"The one thing we can be sure of is that
the global economic recession will last for a long time," the state Xinhua
news agency quoted him as saying on Saturday.
"For an economy like China that depends
heavily on exports, the key is to understand the situation and put one's own
house in order."
Liu Hongke, a Beijing-based economist at
investment bank CCB International, said the latest PMI would boost the case for
monetary easing, such as trimming reserve requirements for banks -- the funds
they must put aside as reserves.
"This may speed up the loosening of
monetary policy," he told AFP.
A top central bank official said in remarks
published Tuesday that China would tweak monetary policy by funding sectors in
need, such as small enterprises and low-cost housing.
Bill Savadove | AFP News
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