Factory gauge drops to new low

A Chinese manufacturing gauge fell to a 12-month low in April, suggesting government efforts to cushion a slowdown are yet to revive the nation's factories.

The preliminary Purchasing Managers Index from HSBC Holdings Plc and Markit Economics was at 49.2, missing the median estimate of 49.6 in a Bloomberg survey, which was also March's final reading. Numbers below 50 indicate contraction.

The first reading of the economy's health in April may deepen concern over a slowdown after first-quarter data showed the weakest economic expansion since 2009. Policymakers have stepped up efforts to halt the slide, cutting banks' reserve requirement ratio by 1 percentage point.

"The growth momentum remains weak in April, which calls for further policy easing," said Zhao Yang, chief China economist at Nomura Holdings Inc in Hong Kong.

"The next step might be a cut in interest rates and I expect they will do that this quarter."

New orders and prices deteriorated, with job losses reported for an 18th month, the survey said.

Premier Li Keqiang has flagged the labor market as key, pledging last month to step in to support the economy if the slowdown hurts jobs and wages. Gross domestic product expanded 7 percent in the three months through March from a year earlier.

Highlighting the strains on China's traditional growth drivers, revenue at State-owned enterprises declined 6 percent to 10.3 trillion yuan ($1.7 trillion) in the January to March quarter from a year earlier, the Finance Ministry said in a statement on Thursday.

The reserve requirement ratio was lowered 1 percentage point on Monday, the People's Bank of China said. While that was the second reduction this year, the new level of 18.5 percent is still high by global standards. The cut will allow banks to boost lending by about 1.2 trillion yuan.