* Jan official PMI at 50.5 vs 50.3 in December
* Jan HSBC PMI at 48.8 vs 48.7 in December
* China FinMin warns of risks to exports, economy
* Further policy easing seen to support growth
By Aileen Wang and Kevin Yao
BEIJING, Feb 1 China's factory sector
expanded slightly in January, confounding expectations for a
contraction and supporting hopes the world's second-biggest
economy will avoid a hard landing, a government purchasing
managers' index showed.
A similar HSBC survey showed the sector contracting the
least in three months, further backing the view that a downturn
in manufacturing may be bottoming out as the government adopts
modest measures to support growth.
The official PMI rose to 50.5 in January from 50.3 in
December, beating market expectations of 49.5 as new orders rose
to a three-month high. A level of 50 demarcates expansion from
"This suggests that the manufacturing sector has stabilised
somewhat due to supportive fiscal and monetary policies," said
Li-Gang Liu, China economist at ANZ in Hong Kong.
"Indeed, the stronger-than-expected PMI supports our
baseline scenario of a soft landing."
The Australian dollar gained a third of a cent on
hopes that the higher-than-expected government PMI would support
Chinese demand for the country's commodities.
"January PMI continued to pick up slightly from the reading
of December, indicating that the economic slowdown trend is
gradually stabilising," Zhang Liqun, a researcher with the
Development Research Centre of the State Council, said in the
"The improvement in both new order and stock of purchase
sub-indexes reflected the factory production is recovering. But
the new export order sub-index dropped last month, showing that
the external demand is shrinking and we should pay high
attention to the possible hit from external uncertainties."
The central bank is shifting towards a looser policy stance
to ward off a sharp growth slowdown, although lingering
inflation concerns point to a gradual move. Fiscal policy
remains expansionary this year.
The official sub-index for new orders rose to 50.4 in
January, its highest since October, from 49.8 in December.
However, reflecting a sluggish global economy and fears of
recession in Europe, new exports orders fell for the fourth
month running. The index dropped to 46.9 from December's 48.6.
The HSBC PMI stood at 48.8 in January -- broadly in line
with its initial reading before China's Lunar New Year holiday.
It marked a slight improvement from 48.7 in December, but
HSBC Chief China Economist Qu Hongbin said the data showed more
government support was needed for the economy.
"The final results of January's PMI survey confirmed the
still weak growth momentum of manufacturing activities into the
New Year," Qu said in a statement.
"This calls for more aggressive easing measures to support
growth, given that inflation is no longer a concern," he said.
HSBC said the areas of concern in the PMI overshadowed the
bright spots. The overall output index pointed to a faster
contraction in January than in December -- reflected in a
purchasing index , which sank to a near three-year low.
HSBC indexes measuring new export orders and backlogs of
work all rose and pointed to growth. The new orders index rose,
but remained below 50, suggesting contraction.
The PMIs are bouncing around their weakest levels in three
China's Finance Minister Xie Xuren highlighted increasing
risks to exporters from weakening overseas demand, in remarks
published on Wednesday.
"As external demand is now clearly fading, Chinese exporters
are facing increasing difficulties," he said.
The official PMI, which is weighted more towards big state
firms, generally paints a rosier picture of Chinese factories
than a PMI produced by HSBC, which includes small private firms
that have been hit harder by credit curbs and weaker demand.
Despite the uptick in the official PMI, most economists
expect China's economic growth to slow further in the first
quarter, dragged down by weak exports and a slowdown in the rate
of property investment.
HSBC's Qu believes economic growth in the first quarter of
2012 will slow down to as little as 8 percent, which would be
the weakest pace in almost three years, from 8.9 percent in the
fourth quarter of 2011.
A Reuters poll forecast first-quarter growth of 8.2 percent,
which it projected would be the low point of the year. However,
full-year growth would still slowdown to 8.4 percent, the
weakest in a decade.
In a nod to growth concerns, the central bank announced a
cut bank reserve requirement ratios (RRR) -- the first such cut
in three years -- at the end of November.
More reserve cuts are expected in coming months to support
growth, although the central bank has been injecting more cash
into the banking system through its money market operations.