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China manufacturing rebounds to 5-month high, signalling No. 2 economy's slowdown stabilizing

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HONG KONG - China's manufacturing contraction eased in May, suggesting the slowdown in the world's second biggest economy is stabilizing.

HSBC's preliminary purchasing managers' index released Thursday rose to 49.7 in May from 48.1 in April. Numbers above 50 on the 100-point scale indicate expansion.

The improvement was "broad-based" with subindexes for new orders and new export orders indicating they had returned to growth, HSBC's chief China economist, Qu Hongbin, said.

"Some tentative signs of stabilization are emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs," said Qu.

China's economy has been slowing, with growth down to 7.4 per cent in the first quarter, as leaders try to reduce reliance on trade and investment and boost domestic consumption.

Leaders in Beijing say they're at ease with slower growth and have shied away from introducing sweeping economic stimulus. But when growth has appeared to cool too sharply they have announced mini-stimulus efforts, most recently in March.

The HSBC reading follows a similar survey by an official group that has also been showing signs of a rebound, with factory activity growing weakly in April.

The improvements in both surveys suggest the government's targeted measures to support the economy are moderating the pace of the slowdown, said Julian Evans-Pritchard of Capital Economics. The measures announced last quarter include spending on railways and public housing.

HSBC's report, compiled with Markit, is based on responses from 85-90 per cent of 420 factories. The final report is due June 3.

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Follow Kelvin Chan at twitter.com/chanman

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