China's manufacturing activity continues to shrink in Aug.

By Kim Young-gyo
HONG KONG, Aug. 23 (Yonhap) -- China's manufacturing activity continues to contract in August for the second consecutive month as the country's tightening measures have taken effect, a British bank said Tuesday.
In a monthly report, HSBC Ltd. said its flash purchasing managers index (PMI) for China's manufacturing sector came to 49.8 for August, up from 49.3 in July. It was the second month in a row that the index fell below the benchmark of 50.
The PMI measures the health of a country's manufacturing sector. A reading of 50 or above represents an expansion of the sector compared to the previous month while a reading lower than 50 represents a contraction.
HSBC said the contraction was made at a fractional rate, suggesting that the hard landing risk is remote in the world's No. 2 economy.
"The flash manufacturing PMI reading picked up slightly to a level close to the break-even mark in August, which is still consistent with around 13 percent year-on-year introduction production growth," said Qu Hongbin, the chief China economist at HSBC.
"Despite the turmoil in global financial markets, the new exports orders index rose to a three-month high, albeit still marginally below 50."
The bank predicted that China's tightening policy will continue to be implemented.
In a battle against soaring inflation, the central People's Bank of China has raised the benchmark interest rate three times this year while increasing the amount of money banks must keep in reserves six times.
China's consumer prices surged 6.5 percent on-year to a 36-month high in July due to soaring food costs. China's inflation gauge grew more than 5 percent for the fifth straight month and exceeded 6 percent for the second month in a row since July 2008.
ygkim@yna.co.kr