-Qu Hongbin, HSBC's chief economist for China
Activity in China's manufacturing sector reached the highest level in four month in February. The preliminary HSBC China manufacturing PMI climbed to 50.1 this month compared with a final reading of 49.7 in January. While the reading broke through the crucial 50-mark threshold, which separates growth from contraction, domestic economic activity is likely to remain weak, while demand from overseas looks uncertain. The output and new orders sub-indexes increased at a quicker pace in February than in the preceding month, while new export orders fell for the first time since April 2014. Both input and output prices remained in contraction territory.
Beijing has been taking steps to cushion a slowdown in economic growth by adjusting fiscal and monetary policy. Nevertheless, policy makers have been reluctant to deploy massive large-scale stimulus as the Chinese government wants to prevent excessive credit growth and asset bubbles. China's officials have reiterated on numerous occasions that lower levels of growth are now the "new normal" in China. Recent data showed the world's second biggest economy expanding an annualized 7.3% in the final quarter last year, overshooting expectations, but was far from the double-digit growth China experienced just a few years ago.
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