China's manufacturing sector has showed slight signs of growth in May, even though demand for the exports has remained stubbornly weak –a development that has prompted a number of companies to shed jobs, feeding worries about a protracted economic slowdown.
On Monday China reported that its official manufacturing Purchasing Manager's Index (PMI) had edged up to 50.2 in May, thereby creeping back into expansion territory. The country's PMI was at 50.1 in April, according to Yahoo! Finance.
However, a survey on small and mid-sized manufacturing firms showed that their activities have contracted for a third straight month, with the final HSBC/PMI standing at 49.2, as reported by Yahoo! Finance. Both indexes for large and small to mid-scale companies are hovering in the 50 level, which marks subdued activity at best.
Analysts at Barclay have stated in a note to clients that the stabilization in China's manufacturing sector has not been visible as of late.
"Overall, in our view, there are not yet convincing signs of near-term stabilization in the economy," the note said.
"We believe risks to the outlook remain to the downside, with the property market correction and government-led infrastructure projects holding the key for the outlook," it added.
HSBC economists see a similar scenario.
"Five months into 2015, the economy sees little sign of a pick-up," they said.
"We forecast more aggressive policy easing, including a 50-basis-point reserve ratio cut in the coming weeks," they added.
Economists at ANZ Bank are also apprehensive about the developments in the country's manufacturing sector, according to Reuters.
"China's economy still faces strong headwinds," they said.
"If capital outflow continues at the pace of the first quarter, we expect the People's Bank of China to cut the reserve requirement ratio by another 100 basis points, in addition to a further interest rate cut of at least 25 basis points," they added.
Zhang Liqun, an analyst at the China Federation of Logistics and Purchasing, however, sees the silver lining in the current circumstances, stating that despite the numbers, a rise in overall new orders in factories pointed to a steadying in market demand, according to Reuters.
"This shows stabilization in economic growth," he said.
