BEIJING • Growth in China's vast manufacturing sector eased only slightly last month in a sign of broad economic resilience, though slowing export orders pointed to risks to the outlook amid a simmering Sino-US trade row.
Beijing is in the third year of an effort to curb a dangerous build-up of debt across the economy, and so far policymakers appear to have successfully steered through the challenge of tempering financial risks without imperilling growth.
The official Purchasing Managers' Index (PMI) fell to 51.4 last month, from 51.5 in March, the National Bureau of Statistics(NBS) said yesterday, but remained well above the 50-point mark that separates growth from contraction on a monthly basis. It marked the 21st straight month of expanding business conditions in China.
Analysts surveyed by Reuters had forecast the index would ease slightly to 51.3.
But the slightly softer reading, especially the slower export orders, adds to concerns about an expected loss of momentum in the world's second-largest economy, as policymakers navigate debt risks and a heated trade row with the US.
"The support to the economy from the easing of pollution controls should now largely have run its course," said China economist Chang Liu at Capital Economics.
"Slower growth is likely in the months ahead as the drags on economic activity from weaker credit growth and the cooling property market intensify."
Signs of softness in the trade sector were already evident in the latest PMI, with the export orders sub-index falling to 50.7 from 51.3. Total new orders also eased slightly, though the sub-index for output remained steady.
There are worries that the tech sector, which burnished China's solid export growth last year, could come under pressure as rising tensions between China and the United States threaten to hit billions of dollars in cross-border trade. The high-tech manufacturing sub-index, however, rose last month to 53.8, compared with 53.2 in March.
Economists expect China's economic growth to ease to 6.5 per cent this year, in line with Beijing's target but below a forecast-beating 6.9 per cent last year, with a regulatory crackdown on the country's finance sector seen as one key risk, a Reuters poll showed.
"The still solid PMI suggests to us that there is no urgent need to move towards a more expansionary fiscal or monetary policy, and that the focus should remain on a gradual and orderly deleveraging to reduce financial risks," Nomura analysts wrote in a note to clients.
The services industry showed "steady development", NBS said. The official services PMI rose to 54.8 from 54.6 in March, extending a solid run of activity.
The services sector accounts for over half of China's economy, with rising wages giving consumers more spending power.
The composite PMI covering both manufacturing and services activity rose to 54.1 last month, from 54 in March.