China's factory activity contracts

China's industrial activity is contracting in December for the first time in seven months as new orders declined, according to the preliminary results of a closely-watched index.

The flash HSBC/Markit manufacturing purchasing managers' index (PMI) fell from November's final reading of 50.0 to 49.5 for the month - below the 50.0 reading forecast by analysts.

The index tracks activity in China's factories and workshops and is a key indicator of the economic health of the Asian giant. A reading above 50 points to expansion, while a reading below 50 indicates contraction.

The manufacturing slowdown will likely confirm investors' fears the world's second-biggest economy is losing momentum and step up calls for more stimulus measures to revive the economy.

The central People's Bank of China slashed interest rates last month for the first time in more than two years in an effort to spur growth, but analysts say further monetary easing is warranted.

Others question whether another round of easy credit is needed, given the country's mound of bad debt and manufacturing overcapacity.

The new orders sub-index also dropped to 49.6 - the first contraction since April - while the level of output in factories also stayed below the 50 mark for the second consecutive month in December, further underlining the challenges facing China's economy.

In response to these index figures, Asian markets mostly slipped on Tuesday, amid oil prices plunging to more than five-year lows.

China's final PMI reading for December will be published on Jan. 2.

el/uhe (Reuters, AFP)