Growth rate slows as the world stops buying big

Manufacturing activity in China slowed in April because of sluggish foreign demand, HSBC says, in a sign of further weakness in the world's second-largest economy.

The British bank's preliminary purchasing managers' index (PMI) dropped to 50.5 this month from 51.6 in March.

The PMI tracks manufacturing activity and is a closely watched barometer of the health of the economy.

A reading above 50 indicates expansion, while anything below points to contraction.

The April preliminary result came in lower because new export orders and employment fell, the bank said. The final result would be released on May 2, it said on Tuesday.

"New export orders contracted after a temporary rebound in March, suggesting external demand for China's exporters remains weak," Qu Hongbin, a Hong Kong economist with HSBC, said.

"Beijing is expected to respond strongly to sustain the economic recovery by increasing efforts to boost domestic investment and consumption in the coming months."

China's 2012 growth of 7.8 per cent was its slowest in 13 years owing to weakness at home and in overseas markets.

Observers had hoped the Chinese economy would rebound this year and drive growth globally after growth increased 7.9 per cent in the last three months of last year, snapping seven straight quarters of slowing expansion.

But the government last week announced a surprisingly weak economic growth rate of 7.7 per cent for the first quarter, below market expectations, fuelling fears the pick-up is faltering.

The International Monetary Fund last week lowered its forecast for China's growth this year to 8 per cent, while Beijing kept its target at 7.5 per cent, unchanged from last year.