Slowdown raises fears for China’s economy

Growth in China’s vast factory sector slowed to multi-month lows in June on faltering new orders, a pair of surveys showed yesterday, boding ill for the world’s second-largest economy still smarting from fears of a credit crunch.

Economists said the two purchasing managers’ indices (PMI) reinforced their concerns that China’s economic cooldown could deepen in the second quarter, especially with Beijing looking increasingly reluctant to take action to stimulate growth.

“The Chinese economy is still struggling at the bottom,” said Haibin Zhu, chief China economist of JPMorgan in Hong Kong.

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Zhu said slowing growth in China’s factory sector, as well as tighter monetary conditions in coming months after a squeeze in the interbank market in the last two weeks, could further hobble the Chinese economy this year.

The official PMI slipped to 50.1 in June from May’s 50.8, just a whisker above the 50-point level that indicates growth. The last time the reading fell below 50 was in September.

A separate PMI survey, conducted by Markit and sponsored by HSBC, fell to a nine-month low of 48.2 from May’s 49.2.

Yet, China’s leaders appear to be comfortable with the country’s slower pace of growth, with President Xi Jinping saying over the weekend that officials should no longer be lauded as “heros” if they chase economic growth at all costs.

The surveys showed demand slackening at home and abroad.

New orders in the official PMI survey tumbled to a four-month low of 50.1 in June.