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China factory activity expands for 1st time this year, latest sign No. 2 economy stabilizing

HONG KONG - Factory activity in China expanded in June for the first time this year, according to an HSBC report Monday, adding to signs that the slowdown in the No. 2 economy is stabilizing as recent micro boosting measures take hold.

The preliminary HSBC purchasing managers' index rose to 50.8 this month from 49.4 in May on a 100-point scale on which numbers below 50 indicate contraction.

June's PMI reading is a seven-month high and the first time that it has pointed to an expansion in China's mainstay manufacturing sector since December's 50.5.

After years of blistering expansion, growth in China's economy slowed to 7.4 per cent in the first quarter as the country's communist leaders put up with slower growth while they try to cut dependence on trade and investment in favour of more sustainable growth based on domestic consumption.

Policymakers in Beijing, who have set a 7.5 per cent official target for economic expansion this year, are resisting calls for sweeping stimulus measures to kickstart growth, though they have unleashed several rounds of small-scale, finely tuned measures when growth has appeared to slow too sharply.

"This month's improvement is consistent with data suggesting that the authorities' mini-stimulus are filtering through to the real economy," HSBC China economist Qu Hongbin said.

"We expect policy makers to continue their current path of accommodative policy stance until the recovery is sustained."

HSBC's PMI, based on responses from responses from 85 to 90 per cent of 420 companies polled, follows a bigger survey by the official China Federation of Logistics and Purchasing that found manufacturing rose to 50.8 in May, its highest this year.

The final version of the HSBC is due July 1.

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