China manufacturing index slips to 3-month low

China's manufacturing sector may grow at a much slower pace in August compared with that in July as the country's economic performance fluctuated amid uncertainties, a survey showed on Wednesday.

The HSBC Flash China Manufacturing Purchasing Managers' Index, the earliest available indicator of China's industrial sector, moderated to 50.3 in August, down sharply from the final reading of 51.7 in July, according to HSBC and research firm Markit.

A reading above 50 means expansion, and the figure for August marked a three-month low after it delivered the best performance in 16 months in July.

Qu Hongbin, chief economist for China at HSBC, said both domestic and external new orders rose at slower rates compared with the previous month.

"The data suggest that the economic recovery is still continuing, but its momentum has slowed again," Qu said. "Therefore, industrial demand and investment activity growth will likely stay on a relatively subdued path."

Qu said both monetary and fiscal policy should remain accommodative until there is a more sustainable rebound in economic activity.

Chang Jian, an economist at Barclays, said the preliminary reading was much weaker than expected, and projected there would be two interest rate cuts in the second half to help ease debt burdens, support demand and mitigate financial risks.

"We continue to believe that the government faces a trade-off between 'tolerating lower growth' and 'rolling out more stimulus' amid a property market correction and uncertain external demand," Chang said.

Chang forecast the official PMI for August, due to be released on September 1 by the National Bureau of Statistics, will moderate to 51.2 from 51.7 in July.