China's manufacturing activity cools for 2nd month in May

By Kim Young-gyo
HONG KONG, June 1 (Yonhap) -- China's manufacturing activity slowed for the second consecutive month in May as the country continued its tightening monetary policies, an industry group said Wednesday.
The Purchasing Managers Index (PMI) for China's manufacturing sector came in at 52 in May, down from 52.9 a month earlier, according to the China Federation of Logistics and Purchasing (CFLP). The May figure was the lowest in nine months.
The PMI is an indicator that measures the economic health of a country's manufacturing sector. A reading of 50 or above represents an expansion of the sector compared to the previous month while a reading lower than 50 represents a contraction.
Market watchers said the slight drop was largely due to China's recent efforts to cool down its economy.
"There is a larger possibility now that China's economic growth will slow down as the PMI dropped last month for the second month in a row," said Zhang Liqun, an analyst for CFLP.
"The index showed that inflationary pressure has eased, but it also indicates growth moderation in China."
In 2010, China's economy expanded 10.3 percent, up from 9.2 percent the previous year, despite the country's monetary tightening to tame inflationary pressure. China's economy continued to maintain strong momentum in the first quarter of this year, growing 9.7 percent.
China's consumer prices rose 5.3 percent in April from a year earlier, growing more than 5 percent for the second straight month.
The Chinese government is expected to continue to maintain its tightening measures, putting its top policy priority on reining in runaway inflation.
The People's Bank of China, the central bank, last week raised the deposit reserve requirement ratio for its major banks for the fifth time this year, following last month's interest rate hike.
ygkim@yna.co.kr