BEIJING, June 1 A duelling pair of surveys of China's vast manufacturing sector on Friday is likely to show that the pace of output slowed further in May, as weak domestic demand doused April's sparks of strength.
China's official Purchasing Managers Index (PMI), which captures activity in the biggest factories in the country - many of them state-backed - is likely to have eased to 52.2 in May from a 13-month high in April, according to a Reuters poll. The figures are due to be published at 0100 GMT.
Smaller private-sector firms are already struggling, according to the preliminary reading of HSBC's rival China Manufacturing PMI, which showed factory output contracting for a seventh month in a row. The final index level for May is due at 0230 GMT.
Although Beijing has announced a raft of reforms to support growth and unlock private investment since mid-May, it is too early for the PMI data to reflect those efforts.
"The measures haven't really fed through yet to factories, the stock market or to individual consumption," said Loewe Cai, head of research at Cifco International Futures.
"Normally, the second quarter is the busiest time for the metals industry, but this year that has not been the case."
Reflecting the weakness, Shanghai copper futures hit their peak in February this year and have since dropped 11 percent. Copper demand generally closely tracks economic activity.
China's annual economic growth is expected by analysts to fall to 7.9 percent in the second quarter, the first dip below 8 percent since 2009. The latest Reuters benchmark poll has a consensus growth forecast of 8.2 percent for the full year, which would be the slowest annual expansion since 1999.
Although the official PMI in April was a 13-month high, economic data for the month was unexpectedly weak, alarming the central government as well as outside investors.
"Downward economic pressure is increasing," Premier Wen Jiabao was quoted on a government website on May 23 as saying.
Many of those investors are hoping China will unleash a massive new stimulus package that will allow them to bet on China recovery plays and markets have gyrated wildly in recent weeks as speculation on stimulus has intensified.
The speculation has been fuelled by government steps in the past two weeks to fast-track about 1 trillion yuan ($159 billion) in infrastructure and industrial projects.
A chorus of comment from influential academics in state-backed newspapers this week has also sought to play down expectations that any programme would seek to replicate a 4 trillion yuan stimulus package during the global financial crisis.
Unleashed in response to the 2008-09 global financial crisis, it left in its wake a 10.7 trillion yuan mountain of local government debt and helped push consumer price inflation to a three-year peak amid a frenzy of real estate speculation.
Beijing has only just brought inflation under control, helping explain why growth is being sacrificed short term. Analysts cite a two-year long programme of property curbs as the main reason why China's economic growth in 2012 will be the slowest since 1999.
In order to avoid a second buildup in local government debt, China will allow private capital to help finance many of these projects, particularly in rail and energy and natural gas distribution.
China has also announced pilot projects to facilitate access to loans, particularly for smaller or private firms and for the under-served rural hinterland.
Meanwhile the central bank has cut 150 basis points (bps) from bank reserves in three moves since November 2011, bringing the rate down from a record high of 21.5 percent.
Analysts polled by Reuters in May, shortly after the latest cut, expected another 100-bps of cuts this year.