Manufacturing growth falters in China

April 30, 2013: 11:26 PM ET
china pmi
HONG KONG (CNNMoney)

A weaker than expected manufacturing report in China has added to worries of slower growth in the world's second largest economy.

China's official purchasing managers' index posted a decline in April, falling to 50.6 from 50.9 the previous month, according to the national statistics agency. A reading above 50 signals expansion in the manufacturing sector.

The disappointing result comes just days after global bank HSBC said its "flash" index of purchasing managers' sentiment fell to 50.5 in April from March's final reading of 51.6.

HSBC will release its final reading on Thursday.

"PMI dropped despite a favorable seasonal factor," wrote Zhiwei Zhang, an economist at Nomura, "and reinforces our view that growth will likely weaken in the second quarter."

The strength of manufacturing in China is considered a barometer of the global economy because of the nation's role as a powerhouse exporter. Because it makes up a large part of China's economy, manufacturing plays an important role in shaping domestic policy.

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China's economy has averaged growth of around 10% a year for the past three decades, allowing the nation to rocket past competitors.

While the growth slowed in 2012 to 7.8%, that figure topped government targets and analyst expectations, signaling an exit to the slowdown that had worried economists.

But China's new leadership -- President Xi Jinping and Premier Li Keqiang -- inherits a country facing challenges over the environment, the rule of law and economic inequities.

The path forward, most analysts agree, requires China to move toward an economy in which consumption drives growth -- no easy task.

Local party officials have long depended on investment spending to maintain clout -- a pattern that reform would undercut. The shift could also undermine the breakneck pace of economic expansion to which China has grown accustomed, at least in the short term.

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