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Survey shows China manufacturing shrinks for 4th month but decline slows slightly

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HONG KONG - China's manufacturing contracted in April for the fourth straight month but the pace of decline was less severe, suggesting the downturn in the world's No. 2 economy is bottoming out.

HSBC's purchasing managers' index released Monday ticked up to 48.1 from 48.0 in March on a 100-point scale on which numbers above 50 indicate expansion.

The reading is slightly lower than 48.3 in a preliminary version of the report last month. But it's the first time the index has risen since it started falling from 50.9 in October.

The report said new export orders contracted in April although the decrease was slight and outpaced by a faster decline in new orders overall, indicating that weak domestic demand was mainly to blame for weakness in manufacturing. Employment at factories declined for the sixth month in a row.

"The latest data implied that domestic demand contracted at a slower pace, but remained sluggish," said HSBC's chief China economist, Qu Hongbin. The numbers "indicate that the manufacturing sector, and the broader economy as a whole, continues to lose momentum."

HSBC's report was more pessimistic than a manufacturing index released last week by the state-sanctioned China Federation of Logistics and Purchasing, which hovered above the no-change level at 50.4. The official survey gives more weight to China's big state companies while HSBC's focuses more on small private enterprises, and the difference indicates the latter are under more pressure amid the slowdown.

Economic growth slowed to 7.4 per cent over a year earlier in the first quarter, with weak trade and manufacturing fuelling concern about a possible rise in politically volatile job losses.

Chinese leaders are trying to shift the economy to growth based on domestic consumption instead of exports and investment.

In the past few years, Beijing has rolled out mini-stimulus efforts when growth appeared to be cooling too sharply, but Qu said "bolder actions" will be required to ensure growth regains momentum.

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