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China manufacturing growth weakens in August in sign economic recovery is losing momentum

HONG KONG - Growth in China's vast manufacturing industry weakened in August, suggesting that the recovery in the world No. 2 economy is losing momentum and Beijing may need to spoon out more stimulus.

The preliminary version of HSBC's manufacturing index, released Thursday, fell to a three-month low of 50.3 from 51.7 in July, indicating that manufacturing businesses are barely growing.

The index, based on a survey of a factory purchasing managers, uses a 100-point scale on which numbers below 50 indicate contraction

China's economy has been struggling to stabilize after slowing from double-digit rates of expansion in the past decade. Growth edged higher to 7.5 per cent in the April-June quarter from 7.4 per cent in the first quarter.

The HSBC report adds to other recent indicators that the recovery is still shaky. Earlier this month, data showed that China's exports accelerated but imports sagged, which may reflect weakening domestic demand.

China's leaders earlier this year unveiled mini-stimulus measures aimed at boosting areas such as public housing and railways. They need to prop up growth to meet the official full-year expansion target of 7.5 per cent while also trying to guide the economy to growth based on domestic consumption rather than exports and investment that have powered China's factories for decades.

"Today's data suggest that the economic recovery is still continuing but its momentum has slowed again," said HSBC's chief China economist, Qu Hongbin. "Therefore, industrial demand and investment activity growth will likely stay on a relatively subdued path. We think more policy support is needed to help consolidate the recovery."

The survey, compiled with Markit, is based on 85-90 per cent of responses from 420 factories. The final version is due Sep. 1.

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