China’s manufacturing activity improved in January despite weaker demand for exports, official figures showed Wednesday, raising hopes the world’s second-largest economy is heading for a soft landing.
The official purchasing managers index (PMI) rose to 50.5 in January, up slightly from 50.3 in December, the China Federation of Logistics and Purchasing said in a statement.
Manufacturing expanded for the second month, after contracting for the first time in 33 months in November, when the PMI stood at 49.
A reading above 50 indicates the sector is expanding while a reading below 50 suggests a contraction.
The improvement came despite mounting evidence that China’s overall economy is slowing as Europe’s sovereign debt crisis and weakness in the United States hits exports, a key engine for growth.
“China’s process of economic contraction is gradually stabilising,” Zhang Liqun, a researcher at government think-tank the Development Research Centre, said in the statement.
China’s economy grew 9.2 percent last year, well down from 10.4 percent growth in 2010, and most forecasts put this year’s expansion at between 8.0 percent and 8.5 percent.
But Zhang warned that slowing export growth could spell trouble for China’s economy later this year.
New export orders fell to 46.9 in January, down from 48.6 last month, according to the latest data released Wednesday.
“Changes in external factors may impact the economy, requiring close attention,” he said.
Still, analysts said the latest reading showed China’s economy was headed for a “soft landing”.
“The manufacturing sector has stabilised somewhat due to supportive fiscal and monetary policies,” ANZ Research said in a report.
“The stronger-than-expected PMI supports our baseline scenario of a soft landing.”
The market had expected PMI to return to contraction in January with a forecast of 49.5, according to a poll by Dow Jones Newswires.
In December, China moved to ease credit by trimming bank reserves for the first time in three years to help boost growth, and analysts expect further cuts in reserve requirements this year.
But a separate PMI measure for China by British banking giant HSBC departed from the official reading.
HSBC also said Wednesday that its final reading of PMI for January was 48.8, nearly unchanged from 48.7 in December, as China’s manufacturing activity contracted for the third straight month.
“This calls for more aggressive easing measures to support growth,” Qu Hongbin, HSBC chief economist for China, said in a statement.
Investors were unmoved by the better-than-expected official PMI with the benchmark Shanghai index down 0.42 percent at midday.