China's manufacturing activity contracted in November for the first time in 32 months, official data showed, amid growing concerns that the eurozone crisis is hurting the key export sector. 
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AFP

Source
AFP
UPDATED 9:20 AM - 26 Aug 2013

China's manufacturing activity contracted in November for the first time in 32 months, official data showed, amid growing concerns that the eurozone crisis is hurting the key export sector.

The purchasing managers index (PMI) fell to 49 last month, down 1.4 points from October, marking the first contraction since March 2009, the China Federation of Logistics and Purchasing said in a statement.

A reading above 50 indicates the sector is expanding while a reading below 50 suggests a contraction.

New orders and new export orders also contracted, according to the data, suggesting weakening demand in China as well as Europe and the United States for Chinese-made products.

The weak data showed China's economy "would continue to slow", government analyst Zhang Liqun said in the statement.

But he ruled out a "huge downfall" in the Asian powerhouse due to the strength of domestic investment and consumption.

Preliminary PMI data released by HSBC last week also showed China's manufacturing activity index slumped to a 32-month low in November, renewing fears the world's second-largest economy was at risk of a hard landing.

The latest PMI numbers come a day after authorities cut bank reserve levels for the first time in three years to help boost lending and spur growth to counter alarming signs of a domestic slowdown and the crisis in key export markets.

"The message is clear: the economy is slowing much faster than expected and the government has stepped into the ring. The loosening campaign has begun," said Alistair Thornton, an analyst at IHS Global Insight in Beijing.

"We expect this to feed through into slower industrial production growth numbers for November, and slower gross domestic product numbers for the fourth quarter."

The move to boost lending, which takes effect on December 5, is the strongest signal yet that the government wants to ease tight credit restrictions put in place to curb surging inflation and property prices -- now showing signs of easing.

Experts had forecast such a move in the coming months after the central bank said recently it would "fine-tune" monetary policy amid growing concerns that the weak global economy is increasing the risk of a sharp slowdown in China.

China's property market, a mainstay of the world's second-largest economy, has faced slumping sales and prices nationwide amid tough government restrictions on property purchases and bank lending.

The country's consumer inflation eased in October to 5.5 percent, the slowest pace since May.

Economic growth also slowed to an annual 9.1 percent in the third quarter from 9.5 percent in the previous quarter.

China, anxious about rising living costs, has pulled on a variety of levers to curb price rises in the past 18 months, including restricting the amount of money banks can lend and hiking interest rates five time since October 2010.