China manufacturing growth slower than expected

HONG KONG (AP) Chinese manufacturing activity ticked up more slowly than expected in September, according to a survey Monday, a sign the gradual recovery in the world's No. 2 economy from an extended slowdown could be more fragile than thought.

A survey by HSBC Corp. showed that manufacturing activity expanded marginally this month, rising to 50.2 from August's 50.1. But it surprised analysts by coming in much lower than the 51.2 in a preliminary version earlier this month. The index uses a 100-point scale on which numbers below 50 indicate contraction.

HSBC said the reading was still positive because although it expanded only slightly, it showed further improvement from July, when the index hit an 11-month low.

"Clearly the recovery is not as strong as we thought," said Alaistair Chan, China economist at Moody's Analytics.

Chan said he wasn't surprised that the latest numbers came in lower than expected, because the preliminary HSBC number seemed a little stronger than other economic data released during the month suggested.

"If you looked at industrial production and retail sales, they were showing some recovery but it wasn't a big jump like 51.2 would suggest," Chan said.

China's communist leaders have been trying to reverse a slowdown in which growth hit a two-decade low of 7.5 percent in the latest quarter. But they've held back on implementing broad-based measures.

Instead, China has used targeted measures such as increased spending on railway construction and tax cuts for small businesses to encourage self-sustaining growth and domestic spending rather than trade and investment.

The survey found that factory output grew for a second month, though at a marginal pace. New orders were flat, but new business from overseas customers grew for the first time in six months, with respondents indicating stronger demand from Europe and the United States.

HSBC's report is based on responses from 420 purchasing executives.

An official purchasing managers' index is due out on Tuesday.