Bloomberg reported that China manufacturing may contract at a slower pace in August as the world second-biggest economy weathers slumping global confidence.

A preliminary reading of 49.8 for a manufacturing index released by HSBC Holdings Plc and Markit Economics today compares with a final reading of 49.3 for July. The final August number is due September 1. A reading below 50 indicates a contraction.

The data suggests that growth in China is moderating rather than collapsing and the slide in the index in July may have been a one-off blip. Investors are focused on the outlook for the nation as US growth falters and European officials grapple with a debt crisis that is yet to be resolved.

Mr Qu Hongbin a Hong Kong based economist for HSBC said “This should help lower fears of a hard landing akin to 2008 autumn sharp slowdown. Inflation not growth remains the top near term macro risk.”

Faltering US and European growth and a deepening debt crisis in the euro zone have triggered a four-week rout that’s wiped out more than USD 8 trillion in global equity values. China commerce ministry cautioned today that exporters face weak demand and rising costs.

Mr Zhang Zhiwei chief China economist at Nomura Holdings Inc. in Hong Kong said “China is on track for a soft landing despite the external risks, with accelerating inland growth and investment in public housing and new projects.”

HSBC preliminary index, known as the Flash PMI, is based on 85% to 90% of responses to a survey of executives in more than 400 companies. The preliminary number has matched the final reading twice since HSBC began publishing the series in February. The final reading fell below 50 in July for the first time in a year. The official manufacturing index released by the statistics bureau and the China Federation of Logistics and Purchasing had a reading of 50.7 in July.

China central bank has raised interest rates five times since mid-October imposed loan quotas and raised banks’ reserve requirements nine times since November to cool inflation and growth.

(Sourced from Bloomberg)