BEIJING (Reuters) - China’s factory activity may have picked up slightly in April as the government uses targeted measures to support the economy, a Reuters poll found, but the slowdown could continue due to a cooling property sector and the impact of structural reforms.
The median forecast of 12 economists expected China’s official manufacturing purchasing managers’ index (PMI) to creep up to 50.5 from March’s 50.3. That would match January’s level and get further above the 50 line that separates expanding activity from a contraction.
“The government is trying to stabilize growth by introducing targeted easing, but I think it’s not enough and further slowdown is possible,” said Minggao Shen, China economist at Citigroup in Hong Kong.
The government has hastened construction of railways and affordable housing and cut taxes for small firms in a bid to underpin growth, while the central bank has cut its required reserve ratios for rural banks.
Chinese leaders, while avoiding a forceful response to the slowdown, have been focusing on market-based reforms to deal with structural distortions and put the world’s second-largest economy on a more sustainable footing, over time.
A preliminary PMI survey by HSBC and Markit Economics showed that factory sector activity ticked up in April but still shrank for a fourth straight month.
The official PMI is weighted more towards bigger and state-owned enterprises and tends to paint a rosier picture than the HSBC/Markit survey, which focuses more on smaller private firms.
Analysts believe the property market could be one threat to Beijing’s plan to arrest a slowdown, as evidence mounts of a rapid cooling in what had been one of the few strong spots in the economy.
Beijing’s efforts to tackle factory overcapacity and pollution have hit output, alongside an anti-corruption campaign that has hurt consumption, even amid a push to offset these effects by cutting red tape and opening state-dominated sectors to private investors.
The latest Reuters poll found respondents believed economic growth could slow to 7.3 percent in the second quarter from 7.4 percent in the previous three months. The economy is expected to grow 7.3 percent in 2014 - the weakest showing in 24 years and down from 7.7 percent last year.
Respondents also expected the central bank to cut the amount of deposits that banks must hold as reserves by 50 basis points in the third quarter.
The official PMI figures will be published on Thursday, May 1 at 9:00 am (0100 GMT). The final HSBC/Markit PMI is due on May 5 (Monday) at 9:45 am.
China Merchant Securities 50.7
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Standard Chartered 50.2
Reporting by Kevin Yao and Jenny Su; Editing by Eric Meijer