China Manufacturing Contracts for 2nd Month

China’s manufacturing (EC11CHPM) contracted for a second month in December as global growth faltered and Premier Wen Jiabao prolonged a crackdown on speculation in the housing market, a purchasing managers' index indicated. The index was at 48.7 in December, HSBC Holdings Plc and Markit Economics said today. That compared with a preliminary result of 49 reported on Dec. 15 and a final reading of 47.7 for November. A reading above 50 indicates expansion. The central bank may cut lenders’ reserve requirements before a Lunar New Year holiday starting Jan. 23 that will fuel demand for cash, according to Bank of America Merrill Lynch. Last month’s half percentage-point reduction, the first since 2008, indicated that the government is putting a bigger focus on supporting growth as inflation cools. “Weakening external demand is starting to bite,” said Qu Hongbin. Policy easing may enable the world’s second-biggest economy to avoid a “hard landing,” he said. In November, China’s export growth was the weakest since 2009, excluding seasonal distortions at the start of each year, as Europe’s debt crisis capped demand.