A survey shows China's manufacturing contracted this month, adding to signs a fragile recovery in the world's number two economy is slowing.
HSBC said today the preliminary version of its monthly purchasing managers index fell to a seven-month low of 49.6 from April's 50.4 on a 100-point scale. Ang figure below 50 show a contraction.
"The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds," HSBC said.
That showed a possible "downside risk to China's fragile growth recovery" while signs of weakness in the labour market "call for more policy support" from the government, the bank added.
China's economic growth slowed unexpectedly in the first quarter to 7.7% and forecasters have cut their growth outlook for the year.
China's top economic official, Premier Li Keqiang, said last week there was little room for additional government stimulus to boost growth and said that improvement would have to come from economic reforms.
Chinese leaders have promised changes but have yet to announce details and economists say any reforms will take time to show results.
HSBC's preliminary PMI is based on responses from 80 to 90% of the 420 manufacturing companies it surveys each month. The full survey is due out June 1.
May factory output increased but at a slower rate, while new orders and new export orders decreased, HSBC said. Some analysts have suggested economic activity is weaker than reported by Beijing because export data might be distorted due to companies reporting inflated prices in an effort to evade capital controls and bring money into China.
