BEIJING - China's manufacturing activity improved in April but remained in contraction, HSBC said Monday, bolstering the case for the government to give a boost to the world's number two economy.
HSBC's purchasing managers index (PMI), which measures factory output, rose to 49.1 in April, up from 48.3 in March, the British banking giant said in a statement.
A reading above 50 indicates expansion, while a reading below 50 suggests contraction. The bank's data marks the sixth straight month the reading remained in contraction.
HSBC's chief economist for China, Qu Hongbin, said the data suggested government measures to spur the economy were having an impact and "should ease concerns of a sharp growth slowdown".
"That said, the pace of both output and demand growth remains at a low level in an historical context and the job market is under pressure. This calls for additional easing measures in the coming months," Qu said in the statement.
Other analysts echoed that view, saying the government will need to further ease monetary policy, most likely through a cut in reserve requirements for banks.
"The pick-up in PMI has reduced worries over China's economic growth, but it will not affect the overall loosening trend for China's monetary policy," You Hongye, an analyst at Essence Securities in Beijing, told AFP.
China economy grew by 8.1 per cent in the first quarter of this year, its slowest pace in nearly three years, putting pressure on Beijing to loosen its monetary policy.
Beijing has cut bank reserve requirements twice since December last year, as policymakers aim to boost lending.
In a research report, securities house Nomura said China would boost spending on infrastructure and cut bank reserves as early as May.
"We still expect monetary and fiscal policy to be loosened in Q2," said Zhang Zhiwei, Nomura China chief economist.
HSBC's figures are typically more pessimistic than China's official numbers. The official data for April has not yet been released.
The HSBC survey puts more emphasis on smaller companies, which are suffering more in the economic downturn than state-owned giants.
The official Chinese government data released last month had shown manufacturing output rose to its highest level in a year in March, the fourth consecutive month that the official numbers indicated expansion.
China's economy is widely expected to slow this year as woes in key export markets such as Europe and the United States hit its overseas sales.
The government has set a target of 7.5 per cent economic growth this year. China's economy grew 9.2 per cent last year and 10.4 per cent in 2010.