GROWTH in China’s giant factory sector edged up to a six-month high in May but export demand continued to shrink, prompting companies to shed workers and keeping alive worries about a protracted economic slowdown, an official survey showed yesterday.

    A similar survey on the services sector showed activity cooled to its slowest rate in over five years, reinforcing views that authorities will have to roll out more stimulus in the coming months.

    The official manufacturing Purchasing Managers’ Index (PMI) edged up to 50.2 from April’s 50.1, the National Bureau of Statistics (NBS) said on its website, in line with analysts’ forecast for a 50.2 reading.

    A reading above 50 points indicates growth on a monthly basis, while one below that points to contraction.

    The non-manufacturing PMI edged down to 53.2, from April’s 53.4, the NBS said.

    Growth in China’s services companies has been more resilient than at ailing factories, but the sector too has succumbed to the broader economic cooldown in recent months.

    However, Zhang Liqun, an analyst at the China Federation of Logistics and Purchasing, argued that a rise in overall new orders pointed to some steadying market demand.

    “This shows stabilization in economic growth,” Zhang said.

    Still, the muted PMI reports suggested that China’s economy is still struggling despite recent interest rate cuts and other policy stimulus, suggesting the government may have to do more to support growth.

    A private sector survey which focuses on small and medium-sized firms showed activity contracted for the third straight month as export orders shrank at the sharpest rate in nearly two years.

    The final HSBC/Markit PMI stood at 49.2 in May, little changed from a preliminary reading of 49.1, and up a touch from April’s 48.9.

    The central bank has cut interest rates three times in six months to lower the real cost of borrowing for firms. Analysts predict it will lower rates at least once more this year.(SD-Agencies)