* Feb official PMI at 51.0 vs 50.5 in Jan
* New orders pick up, index rises to 51.0
* New export orders accelerate, index gains to 51.1
By Kevin Yao and Aileen Wang
BEIJING, March 1 China's factory sector
grew more than expected in February as export orders expanded
for the first time in four months, a government survey showed on
Thursday, supporting hopes the world's second-biggest economy
can avoid a hard landing.
China's official purchasing managers' index (PMI) rose to
51.0, above expectations for a reading of 50.7 and higher than
50.5 in January.
It was the highest PMI since 51.2 in Sept, the figures from
the National Bureau of Statistics showed. A PMI above 50 signals
expansion, while below 50 points to contraction.
The HSBC Flash PMI, the earliest indicator of China's
industrial activity, hit a 4-month high of 49.7 in February, but
new export orders shrank the most in 8 months as global demand
The government's new export orders sub-index rose to 51.1 in
February, indicating expansion for the first time in four months
and the highest reading since 51.1 in May 2011. New export
orders were shrinking in January, when the index was 46.9.
New orders overall rose to 51.0 from 50.4.
"The February PMI continued to pick up, further
confirming a trend that the economy is stabilising," Zhang
Liqun, a researcher with the Development Research Centre of the
State Council, said in the official statement.
"Different from January, last month's expansion in the
manufacturing sector is mainly driven by heavy industries. But
the export and investment demand is expected to ease in the
coming months, albeit at a slower pace. Input price is
accelerating evidently, a reflection of rising imported
inflation," Zhang said.
The official PMI, which is weighted more towards big state
firms, generally paints a rosier picture of Chinese factories
than the PMI produced by HSBC, which includes small private
firms that have been hit harder by credit curbs and weaker
Still, China's economy faces formidable headwinds as exports
falter due to weakening demand in the United States and Europe,
alongside a downturn in the once red-hot property sector in
response to tightening steps by Beijing.
China's annual economic growth is widely expected to slow to
just over 8 percent in the first quarter from 8.9 percent in the
previous quarter, the fifth consecutive quarter of slowdown.
Many analysts expect the central bank to continue its steady
policy easing by cutting the amount of cash that banks must hold
as reserves to crank up credit to ward off sharper growth
China announced a cut in its reserve requirement ratio (RRR)
by 50 basis points to 20.5 percent on Feb 18, releasing about
400 billion yuan ($63 billion) that could be used for bank
lending. It was the second 50-bp cut in the RRR in three months.
The deep-pocketed government has also cut taxes for small
firms, which are vital for generating economic growth and jobs,
to help them cope with a credit squeeze and weaker exports.
Longer-term, China needs to change its economic model, which
for years has relied on the export sector to drive growth, the
World Bank said in a report this week. The government must relax
its grip on industry and move towards free markets, it said.