China manufacturing slows in April

Manufacturing activity slowed in China in April as exports were hit by sluggish overseas demand, HSBC said Tuesday, fuelling concerns about the strength of the world's second-largest economy.

The preliminary figures come just over a week after China revealed growth in the January-March quarter had slowed from the previous three months and HSBC said Beijing would likely move to take measures to stoke economic activity.

HSBC said its initial purchasing managers' index (PMI) fell to 50.5 this month from a final figure of 51.6 in March.

The index tracks manufacturing activity and is a closely watched barometer of the health of the economy. A reading above 50 indicates expansion while anything below points to contraction. The bank's final result will be released on May 2.

"New export orders contracted after a temporary rebound in March, suggesting external demand for China's exporters remains weak," Qu Hongbin, a Hong Kong-based economist with HSBC, said in a release.

"Beijing is expected to respond strongly to sustain the economic recovery by increasing efforts to boost domestic investment and consumption in the coming months."

China's 2012 growth of 7.8 percent was its slowest in 13 years owing to weakness at home and in overseas markets.

Observers had hoped for a rebound this year that would drive a global recovery after October-December saw expansion of 7.9 percent, snapping seven straight quarters of slowing growth.

But the government last week said the first quarter of this year saw the economy grow just 7.7 percent, disappointing economists who had predicted 8.0 percent.

On Tuesday the International Monetary Fund lowered its forecast for China's growth this year to 8.0 percent, while Beijing last month kept its target for this year at 7.5 percent, unchanged from the previous year's.

China's industrial output, which is crucial to job creation, slowed in the first quarter to 9.5 percent, from 10 percent in October-December.

Xiao Chunquan, spokesman of the Ministry of Industry and Information Technology, said Tuesday that downward pressure remains on industrial production growth this year.

"Insufficient effective demand has become a rather significant constraint on industrial development," he said at a press conference.

Xiao noted that both domestic retail sales and overseas markets were slack, while fixed-asset investment has been less efficient in driving industrial growth.

Zhang Zhiwei, an economist with Nomura International, said China's economic growth would further trend down through the rest of the year and could potentially come in at 7.0-7.5 percent for the whole year.

"The effectiveness of policy easing has been diminished by aggressive stimulus measures taken over the past five years," he said in a research note.