- Annabel Fiddes, an economist at Markit
China's manufacturing sector continued to expand, with the official gauge hitting the highest level in six months in May, adding to sings recent stimulus measures are helping to keep the world's second-largest economy on track for meeting policy makers' growth goal. China's official manufacturing PMI climbed to 50.2 in May from 50.1 in April. A reading above 50 signals growth in manufacturing activity, while a figure below 50 is an indication that the sector is contracting. Meanwhile, the final manufacturing PMI reading compiled by HSBC and Markit came in at 49.2, in line with expectations and a slight improvement from the 49.1 estimate in the "flash" reading. The reading was 48.9 in April. According to the survey, production contracted for the first time in 2015 partly due to a fall in new export work, which was the sharpest in two years. A separate report showed growth in China's services industry cooled on May, with non-manufacturing PMI edging down to 53.2, from April's 53.4.
Weighed down by a property slowdown, factory overcapacity and high levels of local debt, China's economic growth is expected to slow to around 7% this year from 7.4% in 2014. In a an attempt to boost growth and reduce borrowing costs, the PBoC already has delivered three interest rate cuts since November, lowering the benchmark lending rate by 90 basis points, and cut bank reserve ratio by 150 bps this year.
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