China factory activity continued to be weak in July: Surveys

China's factory activity continued to be weak in July with persistent pressure on the economy extending into the third quarter, even as bigger firms fared better, with the government moving to bolster growth, a pair of surveys showed yesterday.

A marginal improvement was seen in the official PMI for the economy that had slowed in nine of the past 10 quarters. However, analysts cautioned against rushing to a conclusion that the second-largest economy in the world had arrested its decline.

The government had tried to allay concerns over the slowing down of the economy more than expected as it pushed through reforms. It recently came out with a series of targeted support measures and expressed confidence of meeting its 7.5 per cent growth target this year.

According to Haibin Zhu, chief China economist at JP Morgan Chase in Hong Kong, the government needed to do more to strengthen this momentum if one looked at the official figure. There were still a lot of uncertainties in the economy, he added.

The official PMI, which focused on big and state-owned firms, published by the National Bureau of Statistics, was up to 50.3 in July from 50.1 in June as against economists' expectations of its fall to 49.9.

A key measure of Chinese manufacturing activity dropped to an 11-month low in July, HSBC confirmed today, indicating further weakness in the world's second-largest economy.

According to HSBC, the final reading of its purchasing managers' index (PMI) stood at 47.7 last month, down from 48.2 in June and the lowest since August last year.

The PMI tracking manufacturing activity in China's factories and workshops and is a closely followed measure of health of the economy, with a reading below 50 indicating contraction, while anything above signals expansion.

The bank said in a release that it was unchanged from the preliminary result for July, announced last week, and signaled "a deterioration of business conditions for the third consecutive month.''

"With weak demand from both domestic and external markets, the cooling manufacturing sector continued to weigh on employment," Qu Hongbin, HSBC's Hong Kong-based chief economist for China, said in the bank's statement.

"Yet this, plus the recent weaker data, has prompted Beijing to introduce more fine-tuning measures, from tax breaks for small companies to increased spending on public housing, railway, energy saving and IT infrastructure areas," he added.

"These targeted measures should boost confidence and reduce downside risks to growth."

Worries over the country's economy had intensified this year with an expected rebound failing to emerge. China's economy registered a 7.8 per cent growth in 2012, which came as its worst performance in 13 years.