China output shrinks more than thought in May: HSBC

BEIJING, June 03, 2013 (AFP) - China's manufacturing activity shrank more than first reported in May, HSBC said on Monday, confirming the first contraction in seven months.

The British banking giant's final purchasing managers' index (PMI) reading for May came in at 49.2, the bank said in a press release, the lowest for eight months and worse than the preliminary 49.6 announced on May 23.

A reading below 50 indicates contraction in the sector.

The HSBC and central government PMIs are both widely watched indicators of the health of the Chinese economy.

HSBC's index stood at 50.4 in April and May's final figure was the worst since the 47.9 recorded in September.

The result was in stark contrast to the Chinese government's PMI result for May, which came in at 50.8, better than April's 50.6, the National Bureau of Statistics said on Saturday.

Mr Qu Hongbin, HSBC chief economist for China, said in the bank's release that its final PMI "suggests a marginal weakening of manufacturing activities towards the end of May, thanks to deteriorating domestic demand conditions".

He added: "With persisting external headwinds, Beijing needs to boost domestic demand to avoid a further deceleration of manufacturing output growth and its negative impact on the labour market."

Expectations that China's economy was poised to accelerate in 2013 after showing strength at the end of last year have so far been dashed.

The government in April announced a surprisingly weak economic growth rate of 7.7 per cent for the first quarter.

China's economy, the world's second largest, expanded 7.8 per cent in 2012, its worst result in 13 years.

The International Monetary Fund last week cut its 2013 growth forecast for China to "around 7.75 per cent", while Beijing in March kept its growth target for 2013 at 7.5 per cent, unchanged from last year.