- Shuang Ding, Standard Chartered Ltd. economist
Activity in China's manufacturing sector weakened in February, reinforcing the view for more monetary stimulus as the world's second biggest economy continues to struggle with overcapacity and sluggish demand. China's official manufacturing PMI dropped to 49.0 last month, its lowest level in over four years, down from 49.4 in January. The official PMI has remained below the key 50-mark threshold for seven consecutive months. A sub-index of official PMI measuring production declined, while the new order sub-index dropped to the lowest level since the global financial crisis. A separate private measure of the nation's factory activity health, the Caixin China manufacturing PMI declined to 48 in February, compared with 48.4 the month before. The Caixin index has remained in contraction territory for 12 months in a row. The weak PMI data was partly due to seasonal effects, with a week-long Lunar New Year holidays keeping much of the country closed. Analysts believe that markets should wait until March to get a more precise picture of China's production. Moreover, China's official services PMI dropped to 52.7 in February, down from 53.5 in the prior month.
Earlier in the week the PBoC cut its Reserve Requirement Ratio for large banks by 50 basis points to 17%.
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