HSBC said on Thursday that its China Manufacturing Purchasing Managers' Index (PMI) in February reached a four-month high, signaling broad stabilization of output, in spite of new export business decreases at fastest rate since June 2011.
The statistics released by the banking giant showed that the PMI, a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy, registered 49.6 in February, up from 48.8 in the preceding month.
Companies reported a continued decrease in total new order intakes during the month, while the pace of reduction in new work was only modest, said HSBC.
Anecdotal evidence indicated that muted demand conditions had contributed to the overall decline in new business. Additionally, new export business fell during February, following a broadly stable outcome in January, with the pace of reduction the fastest in eight months.
HSBC said manufacturing employment increased during February. Although modest, the rate of job creation was the sharpest since May last year. Companies that reported a rise in staff numbers mentioned higher output requirements and, in some cases, business expansion plans.
"Growth remained flat on weakening new order intakes," said Qu Hongbin, chief Economist on China at HSBC.
"Despite the marginal improvement in the headline PMI, led by quickening production and a recovery of hiring after the Chinese New Year, deteriorating external demand is adding more downside risks to growth in the absence of a strong comeback in domestic demand," Qu said.
"We expected China's central bank to step up policy easing efforts as inflation pressures recede," he added.