Economic growth slowed down reflected by index’s fall

Weak domestic demand makes output indicator turn negative for five months in a row and Yuan declines.

A measure of mainland manufacturing activity has fallen sharply this month, underscoring concerns about slowing growth and bolstering monetary tightening.

The preliminary reading of 48.1 on the HSBC/Market purchasing managers' index declined from the final reading of 49.6 last month, suggesting the overall rate of contraction in manufacturing is deepening. New orders sunk to a four-month low.

That marks the fifth straight month the index has been in negative territory, signaling extended difficulties for mainland manufacturers.

Growth momentum could slow further amid a combination of sluggish new orders for exports and softening domestic demand.

The disappointing data stoked market fears of a hard landing for the world's fastest-growing major economy, with regional currencies declining against the US dollar on March 23.

The yuan, which trades within a tight band, declined following the report's release. The yuan was trading at 6.3206 against the dollar, compared with 6.3162 earlier - despite the central bank's aggressive fixing of the central parity at 6.3004.

The stock market reaction was more muted on Hong Kong and mainland exchanges. The Shanghai Composite Index lost 0.1 per cent, while Hong Kong's Hang Seng Index rose 0.2 per cent.

Despite the possibility of a further cut in the ratio in the near future, said an interest rate cut was not imminent.

Sub-index readings within the PMI suggest that weak domestic demand was largely responsible for the manufacturing slowdown.

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