China's economic growth could be slowing further as data on Thursday showed the first year-onyear drop in foreign direct investment in 28 months and a fresh fall in new orders signalled a further contraction in factory activity.
The data highlights increasing risks to China's growth emanating from a deterioration in developed market economies while domestic demand is being dented by government efforts to rein in rampant real estate inflation.
"Growth momentum remains weak with additional downside risks from exports and the property market not yet fully filtering through," said Qu Hongbin, chief China economist at HSBC.
"With inflation quickly shifting to disinflation, the Chinese government can and should make more aggressive easing on both fiscal and monetary fronts to stabilise growth and jobs."
Qu's comments accompanied the release of the HSBC flash manufacturing PMI, which showed China's factory activity shrank again in December after new orders fell. The PMI, the earliest indicator of China's industrial activity, is likely to entrench views that manufacturers are struggling with waning global demand and tight domestic credit conditions.
The contraction indicated by the PMI came swiftly after commerce ministry data revealed the first year-on-year fall in foreign direct investment growth in China in 28 months. November's $8.8 billion of commitments were down 9.8% on November 2010, the first fall since July 2009's 35.7% year-on-year collapse to $5.4 billion.
A sharp drop in inflows from the US was a particular drag, slowing year-to-date growth in FDI flows to 13.2% from 15.9% in October's data.
