Beijing: Activity in China`s factory sector dipped to a 11-month low in March as new orders shrank, a private survey showed, signalling persistent weakness in the world`s second-largest economy that will likely fuel calls for more policy easing to support growth.
The flash HSBC/Markit Purchasing Managers` Index (PMI) dipped to 49.2 in March, below the 50-point level that separates growth in activity from a contraction on a monthly basis.
Economists polled by Reuters had forecast a reading of 50.6, slightly weaker than February`s final PMI of 50.7.
"A renewed fall in total new business contributed to a weaker expansion of output, while companies continued to trim their workforce numbers," said Annabel Fiddes, an economist at Markit said.
"Manufacturing companies continued to benefit from falling input costs, stemming from the recent global oil price decline. However, relatively muted client demand has led firms to pass on savings in a bid to boost new work, and cut their selling prices at a similarly sharp rate."
Stocks in China and Hong Kong fell after the factory survey, while the Australian dollar dipped.
The survey suggested that manufacturers faced considerable challenges from weaker domestic demand and deflationary risks.
The new orders sub-index fell to a 11-month low of 49.3 in March. New export orders decreased for a second straight month, albeit at a slower pace.
Pressure on the job market continued to rise, with the employment sub-index contracting for a 17th straight month and hitting its lowest since the height of the global financial crisis.
China`s leaders have said they would be willing to tolerate somewhat slower growth as long as the labour market remained resilient.
The economy faces increased downward pressure this year but the slowdown is stabilising, with employment and services among the bright spots, Vice Premier Zhang Gaoli said on Sunday.
Weighed down by a property downturn, factory overcapacity and local debt, China`s growth is expected to slow to a quarter-century low of around 7 percent this year from 7.4 percent in 2014, even with expected additional stimulus measures.
Data so far in 2015 indicate the new growth target may already be at risk.
Annual economic growth could slow to 6.85 percent in the first quarter from 7.3 percent in the fourth quarter of 2014, the Chinese Academy of Social Sciences, a top government think-tank, said in a research report on Sunday.
It expected growth to cool further to 6.8 percent in the second quarter.
Meanwhile, central bank governor Zhou Xiaochuan cautioned against loosening monetary policy abruptly, saying that could undermine structural reforms.
The central bank has cut interest rates twice since November and lowered bank`s reserve requirement ratios, on top of a raft of other monetary and fiscal support measures in 2014. More such moves are expected in coming months.
The government also plans to run its biggest budget deficit in 2015 since the global crisis to boost spending, but analysts doubt investment will pick up sharply this year given that local governments are hard-pressed by piles of debt.
