Growth in China's vast factory sector slowed to multi-month lows in June on faltering new orders, a pair of surveys showed on Monday, 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.
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 9-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. Unlike previous months, it did not publish a reading for new export orders this month without explaining why.
The HSBC/Markit PMI, which focuses on smaller firms and exporters, showed new orders in June slumped to their lowest level since October, even though producers had cut prices to improve sales.
The HSBC survey also showed new export orders shrinking in June at their fastest pace since September as U.S. and European clients reduced purchases even after Chinese producers passed on cost savings.
Another pair of PMI surveys measuring service activities is scheduled to be announced on Wednesday.
Despite growing worries from investors, China's new leadership of President Xi Jinping and Premier Li Keqiang, who formally took office in March, appeared comfortable with the economic slowdown and reiterated efforts to speed up reforms.
"We need to improve method and means of measuring performance," said President Xi, during a weekend meeting with his high-ranking team. "We should no longer call someone a hero simply based on GDP growth rate."
His determination to push on with market reforms and the rebalancing of the investment- and export-driven economy was highlighted by turmoil in the interbank market in the last two weeks, when the central bank let short-term borrowing cost spike to record highs without immediately injecting liquidity to ease conditions.
