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China's factory activity records modest drop in May: report

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BEIJING, May 24 (Xinhua) -- China's manufacturing activity showed a modest drop in May, as new orders continued to contract in the month, according to a reading of the manufacturing purchasing managers index (PMI) released by HSBC on Thursday.

The flash China manufacturing PMI eased to a two-month low of 48.7 in May, down from 49.3 in April, but the output sub-index bounced above the boom-or-bust level to reach a seven-month high of 50.5, compared with 49.3 in April, according to HSBC.

A reading above 50 suggests expansion, while a reading below 50 indicates contraction.

"Manufacturing activities softened again in May, reflecting the deteriorating export situation. This calls for more aggressive policy easing as inflation continues to slow," Qu Hongbin, chief economist at HSBC China and co-head of Asian Economic Research at HSBC, wrote in a research note on the PMI reading.

Qu expected China's policymakers to step up easing efforts to stabilize growth, as indicated by a slew of measures to boost liquidity, public housing and infrastructure investment and consumption.

"As long as the easing measures filter through, China will secure a soft landing in the coming quarters," he noted.

HSBC's preliminary figure for the Chinese PMI is calculated based on 85 to 90 percent of the total responses to HSBC's monthly PMI survey, and it is issued about one week before the final PMI reading.

The National Bureau of Statistics and the China Federation of Logistics and Purchasing are expected to release the official PMI data for May on June 1. The official PMI data are based on a survey of purchasing managers in more than 820 companies in 20 industries.

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