China manufacturing contracts

Activity in the Chinese manufacturing sector contracted for the second straight month in January, according to a private survey released Monday by financial services company HSCB, raising concerns about the strength of the world's second-largest economy.

The purchasing manager's index (PMI) rose to just 49.7 on a seasonally adjusted basis, up from 49.6 in December, as factory activity continued to be stuck below the 50-point level that separates growth from contraction.

HSCB's figures were slightly lower than the official PMI released Sunday, which saw activity drop 0.3 percentage points to a 28-month low of 49.8 in January. The unexpected contraction increases pressure on Beijing to take action as economists call for a combination of rate cuts and monetary stimulus.

"Demand in the manufacturing sector remains weak and more aggressive monetary and fiscal easing measures will be needed to prevent another sharp slowdown in growth," said HSCB Chief China Economist Qu Hongbin.

More trouble ahead?

The downbeat Chinese data came on the heels of a sharp US economy in fourth-quarter slowdownfourth-quarter slump in US gross domestic product#, as well as more trouble ahead for the eurozone after Greece's new leftist Syriza government last week refused to work with its key lenders - the European Commission, the European Central Bank and the International Monteray Fund, known collectively as the troika.

"The combination of softer U.S. data, the disappointing China PMI and the fact that Greece is now very much on a collision course with the rest of Europe over its budget should continue to weigh on risk sentiment in Asia, Westpac Global Strategy Group warned in a note to clients.

Last year, China's economy grew at 7.4 percent, marking its weakest pace in 24 years.

pad/hg (AFP, dpa, Reuters)