Fears of China slowdown as factory sector contracts

The sharper-than-expected fall weighed on Asian bourses overnight. Hong Kong's Hang Seng dropped 1.51pc, while the Nikkei in Japan declined 0.79pc. South Korea's Kospi lost 1.16pc, Shanghai dipped 1pc and stocks in Shenzhen fell 0.7pc. European markets have had a subdued start to the day. The FTSE 100 opened flat, while the Dax in Germany has fallen 0.12pc.

The marginal contraction of January’s headline HSBC Flash China Manufacturing PMI was mainly dragged by cooling domestic demand conditions," he said.

"As inflation is not a concern, the policy focus should tilt towards supporting growth to avoid repeating growth deceleration seen in 1H 2013.”

Economists at Barclays said the dip is unlikely to be due to lower activity in the run-up to the January 31 Chinese New Year, since the HSBC survey does not show strong correlation with the date of the lunar holiday in recent years. Instead, they cited "continued slowdown in growth momentum rather than seasonal factors" for the decline.

The so-called flash estimate, based on 85-90pc of survey respondents, is the earliest indication of manufacturing operating conditions in China. HSBC will release final PMI data will be available on January 30, while China's National Bureau of Statistics will publish official PMI data, which is more weighted towards large, state-owned companies, on February 1.

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