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China February official PMI to dip, hurt by weak export demand

A labourer works at a steel factory in Dalian, Liaoning province December 4, 2012. REUTERS/China Daily
A labourer works at a steel factory in Dalian, Liaoning province December 4, 2012. REUTERS/China Daily

BEIJING (Reuters) - Chinese factory activity probably grew at its slowest pace in four months in February as foreign demand remained sluggish, shoring up expectations that China's economy is set for a only feeble recovery this year.

The median forecast from a Reuters poll of 14 economists showed the official purchasing managers' index (PMI) likely edged lower to 50.2 in February after seasonal adjustments, from January's 50.4.

That suggests Chinese factories still grew in February on a monthly basis, but only modestly since the 50-point level separates expanding from contracting activity.

"The focal point will be new export orders, which dipped into the contraction zone in January," said Connie Tse, an economist at Forecast Pte in Singapore.

China's large export sector has been one of the worst-performing parts of its economy in the past two years as belt-tightening by European and U.S. shoppers slashed demand for Chinese goods, a trend analysts say should subsist in 2013 if global consumption gradually recovers.

Growth in Chinese exports averaged 8.4 percent each month last year, down sharply from monthly expansion of 20.7 percent in 2011.

In a possible sign of things to come, China's official PMI for January showed export orders shrank on a monthly basis as the sub-index fell to 48.5.

The HSBC flash PMI released this week, and which is the earliest indicator of China's economic health in any month, also showed export orders sub-index dipping to 49.8.

Dour export growth has forced China to turn to domestic demand to lift its economy. Its central bank cut interest rates twice last year by a total of 50 basis points while Beijing upped state spending by accelerating the building of some infrastructure.

But critics say China's dependence on debt-funded construction of infrastructure is an unsustainable solution for its growth woes.

They say China should instead focus on empowering its consumers through measures including improving its pension and healthcare schemes and the distribution of national income, and lowering individual tax burdens.

The official PMI data will be released on Friday, March 1, at 0100 GMT. The final reading of the HSBC PMI will also be published on Friday at 0145 GMT.

FORECASTS

Barclays 49.6

Citi 49.8

Forecast 50.0

Standard Chartered 50.1

Bank of China 50.2

Zhaoshang Securities 50.2

Rising Securities 50.2

Haitong Securities 50.2

Zheshang Securities 50.3

China Capital Securities 50.5

Huarong Securities 50.5

CICC 50.6

Industrial Bank 50.9

Industrial Securities 50.9

----------------------------------

Median 50.2

Highest 50.9

Lowest 49.6

Prior 50.4

(Reporting by Koh Gui Qing; Editing by Kim Coghill)

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