HSBC flash PMI sinks to a 7-month low

Worries about a further slowdown in the Chinese economy surfaced after the fourth quarter of 2013, when the government released no signals about easing monetary policy in the short term.

The official manufacturing PMI for January dropped to a six-month low of 50.5 from 51 in December and 51.4 in November, lower than market expectations, according to the National Bureau of Statistics.

The China MNI business sentiment index fell further in February to 50.2, compared with 52.2 in January and 58.4 in December, according to a research note from Nomura Securities Co Ltd.

Zhang Zhiwei, chief Chinese economist at Nomura, said: "We continue to believe that China's monetary policy stance has a moderate tightening bias and expect GDP growth to slow to 7.5 percent in the first quarter and 7.1 percent in the second, despite favorable base effects."

In 2013, the growth of the world's second-largest economy slowed to 7.7 percent from 7.8 percent during the third quarter.

The government will likely loosen monetary policy in the second quarter to support the economy if the government decides to keep its 7.5 percent growth target for this year.

A research note from North Square Blue Oak Ltd, a United Kingdom investment bank, said that given concerns regarding the overall slowdown, the government is expected to support more small and medium-sized enterprises in its reform scheme, a potential hot topic in next month's National People's Congress and Chinese People's Political Consultative Conference sessions.

"The State Council has just removed the minimum registered capital requirement for startups and showed more willingness to share more development opportunities in State-owned enterprises reform and government projects," it said.

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