China's manufacturing activity continues to contract in September for the third consecutive month as the country's tightening measures have taken effect, a British bank said Thursday.
In a monthly report, HSBC Ltd. said its flash purchasing managers index (PMI) for China's manufacturing sector came to 49.4 for September, a marginal gain from 49.8 in August. The numbers, however, marked the third 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.
"This is a similar moderating growth picture as in the previous two months. Fears of a hard landing are unwarranted," said Qu Hongbin, the chief China economist at HSBC.
Qu said resilient domestic demand is sufficient to support around 8.5-9 percent growth in the coming quarters, with the country becoming less dependent on exports.
China's gross domestic product (GDP) grew 9.5 percent on-year in the April-June period, down from the 9.7 percent expansion recorded in the first quarter of 2011.
The economist expected that the Chinese authorities will maintain a stable monetary policy for the rest of the year, as inflationary pressures are still high.
"The consumer prices index has peaked, but its subsequent slowdown is likely to be very gradual," he said.
To curb the country's persisting inflation, the central People's Bank of China (PBOC) has raised the benchmark interest rate three times this year while increasing the amount of money banks must keep in reserve six times.