* Flash PMI ticks up to 48.3 in April from 48 in March
* Offers early signs of stabilisation as govt supports
* Analysts expect more targeted policy measures
(Adds detail, analyst quotes)
By Kevin Yao
BEIJING, April 23 China's factory activity
shrank for the fourth straight month in April, signalling
economic weakness into the second quarter, a preliminary survey
showed on Wednesday, although the pace of decline eased helped
by policy steps to arrest the slowdown.
Analysts see initial signs of stabilisation in the economy
due to the government's targeted measures to underpin growth,
but believe more policy support may be needed as structural
reforms put additional pressures on activity.
The HSBC/Markit flash Purchasing Managers Index (PMI) for
April rose to 48.3 from March's final reading of 48.0, still
below the 50 line separating expansion from contraction.
"It's generally in line (with expectations), reflecting that
the growth momentum is stabilising," said Zhou Hao, China
economist at ANZ in Shanghai, who expected economic growth to
pick up slightly to 7.5 percent in the second quarter.
Annual growth in China's economy slowed to 7.4 percent in
the first quarter from a year earlier, its slowest pace in 18
months, but the pace was just ahead of market expectations and
seemed to soothe fears of a sharp downturn.
China's central bank will cut the amount of deposits rural
banks must hold as reserves by between 0.5 and 2 percentage
points, it said on Tuesday, the latest in a series of measures
to help combat a slowing economy.
CICC estimated that the reserve cut could release 110
billion yuan ($17.64 billion) of bank liquidity, while Nomura
put the amount at 80-90 billion yuan, which was small given the
size of the economy.
Many economists still expect a cut in the reserve
requirement ratio for all banks later this year, as protracted
economic weakness fuels capital outflows, raising the pressure
on the central bank to pump more liquidity into the economy.
The government has already unveiled steps to quicken
construction of railways, affordable housing for the poor, and
cut taxes for small firms to underpin growth.
Signs of a slowdown in the first quarter had been evident in
a series of economic indicators, prompting the government to
unveil a series of measures to promote growth, although it has
ruled out major stimulus.
It has also said that its main focus will be on job
creation, and that it did not matter if growth in 2014 came in a
little below the official target of 7.5 percent.
NEW EXPORT ORDERS SLIP
The survey showed contractions in new orders and output
moderated somewhat, though new export orders slipped back below
the 50 line after a pick-up in March, suggesting that the
external environment remains difficult for Chinese firms.
"Domestic demand showed mild improvement and deflationary
pressures eased, but downside risks to growth are still evident
as both new export orders and employment contracted," said Qu
Hongbin, chief economist for China at HSBC, in a statement
accompanying the PMI.
He added that he expected more government support measures
in coming months, which was echoed by ANZ's Zhou, who believed
policy support would be targeted and measured.
Analysts believe that China's property market could threaten
Beijing's plan to manage a slowdown in growth, as evidence
mounts of a rapid cooling in what had been one of the few strong
spots in the world's second-largest economy.
($1 = 6.2375 yuan)
(Additional reporting by China economics team; Editing by Kim
Coghill and Jacqueline Wong)