China's factory output expanded only modestly in July, according tosurveys released Wednesday, and analysts said weakening export demand pointedto the need for more efforts to revive growth.
The state-affiliated China Federation of Logistics and Purchasing saidWednesday that its purchasing managers' index, or PMI, fell 0.1 percentagepoint to 50.1 in July, the slowest growth in eight months and just above the 50level signifying expansion. The index was at 50.2 in June, 50.4 in May and 53.3in April.
"The index dropped with off-season declines in production andconstruction, allowing little evidence the economy is bottoming out," thefederation said in its report. "Current demand is weak and downwardpressure has yet to eliminate oversupply."
A second survey, by HSBC, showed overall manufacturing activity deterioratingat a slower rate. Factory production rose for the first time in five months butmanufacturing employment declined at the sharpest rate in over three years, itsaid.
HSBC's PMI rose to 49.3 in July, up from 48.2 in June. Although still below 50,it was the sharpest month-on-month increase in nearly two years, HSBC said. ThePMI indexes measure overall manufacturing activity by surveying numerousindicators including orders, employment and actual production.
"This is far from inspiring, as China's growth slowdown has not beenreversed meaningfully and downside pressures persist with external marketscontinuing to deteriorate. We still expect Beijing to step up policy easing inthe coming months to support growth and employment," said HSBC economistQu Hongbin.
China's economic growth fell to a three-year low of 7.6 percent in the secondquarter, relatively robust when compared with the U.S. and Europe but low forChina after years of double-digit growth.
The slump comes at a sensitive time for the ruling Communist Party, which ispreparing to hand power to a younger generation of leaders this year.
China has cut interest rates and slashed gasoline and diesel retail prices whilemoving cautiously with a "mini-stimulus" plan, mindful of the painfulhangover of inflation, wasteful construction and debt from its 4 trillion yuan($586 billion) avalanche of spending in response to the 2008 global crisis.
The government has promised to pump more money into the economy with spendingon low-cost housing, airports and other projects.
Still, industries such as oil and food processing, electrical machinery,transport, aerospace and communications equipment showed expansion, especiallyfor large manufacturers, while production by smaller companies continued tocontract.
"Helped by effective policies, future market demand is expected to besteady," federation economist Zhang Liqun wrote in the report."Economic growth will stabilize or accelerate."
Weakness in the global economy is taking a heavy toll, the government surveyshowed, with the index for new export orders falling nearly 1 percentage pointto 46.6.