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Surveys show China manufacturing weak in February, companies cut more jobs

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BEIJING — China's manufacturing was lackluster in February and industrial employers shed more jobs, two surveys showed Wednesday, adding to pressure on Beijing to shore up weakening growth in the world's second-largest economy.

HSBC's monthly manufacturing index, which is based on a survey of factory purchasing managers, fell to 49.6 from 50.7 in January on a 100-point scale. Numbers below 50 show activity contracting. A separate index by an industry group, the China Federation of Logistics and Purchasing, and the National Bureau of Statistics edged up 0.2 points from February to 50.1.

Both surveys showed manufacturing employment contracting. HSBC said it was the 17th straight month of contraction for the employment component of its index and companies shed jobs at their fastest rate in seven months.

Communist leaders are keenly sensitive to possible job losses and unrest as they try to steer China's economy to slower, more self-sustaining growth based on domestic consumption instead of exports and investment.

Despite improvement in the official index, "growth is still likely to have slowed sharply last quarter," said Julian Evans-Pritchard of Capital Economics in a report. "We expect more policy support measures, including further rate cuts and required reserve ratio reductions, as the government moves to avoid missing its annual growth target."

The top Chinese economic official, Premier Li Keqiang, said in March that Beijing might intervene to stimulate growth if employment weakens too much.

Beijing has cut interest rates twice since November to spur economic growth that fell to 7.3 percent in the final quarter of last year, fueling fears of a politically dangerous spike in job losses.

Manufacturing "continues to struggle to gain growth traction," said economist Annabel Fiddes of Markit Economics, which conducted the HSBC survey, in a statement.

"Company downsizing policies contributed to a further decline in manufacturing employment," said Fiddes. "Any savings were generally passed on to clients as part of attempts to attract new business, suggesting a further squeeze on profit margins."

Instead of the uptick usually seen as Chinese factories resume work following the Lunar New Year holiday, HSBC said its survey showed new orders declined for the first time in three months. New export work also fell for a second straight month.

The HSBC and Federation of Logistics and Purchasing surveys showed prices of industrial goods declined again in February, a sign of weak demand.

On Sunday, the Chinese central bank governor, Zhou Xiaochuan, said economic growth had fallen "too sharply." He said inflation has fallen so low the country should be alert to the possibility of deflation, or a damaging overall decline in prices.


HSBC Corp.: http://www.hsbc.com

China Federation of Logistics and Purchasing: http://www.chinawuliu.com.cn

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