China's factory output weakens - FT.com An important gauge of China's manufacturing sector has weakened sharply, adding to the pressure on the government to take more decisive action to support the flagging economy. The official purchasing managers" index for manufacturing fell to 50.4 in May, its lowest in five months, from 53.3 in April. Although it was the Chinese PMI's sixth straight month above the 50 level, which signals an expansion of activity, the fall in the index highlighted a clear softening of growth momentum. IN Asia-Pacific As the first item of official economic data for May, the PMI offers a timely glimpse into how the Chinese economy performed over the past month. Many analysts and officials had believed that China was on track for a "soft landing" until a raft of poor data in April led to a flurry of growth forecast downgrades. The May PMI numbers could reinforce those concerns. The sub-index for output fell 4.3 points to 52.9, while the new orders sub-index was down 4.7 points to 49.8, signalling an outright contraction. "The big decline in new orders indicates that new business activity will decline, leading to a continued fall in economic growth," said Zhang Liqun, an economist with the Development Research Center, a think-tank under the cabinet. Premier Wen Jiabao said last week that it was time to "give more priority to maintaining growth," a comment that was interpreted as a call for more fiscal spending to support the economy. That was followed by a series of reports in official media about accelerated approvals for large investment projects, from airport expansions to new steel plants. But just as investors and journalists started talking of a fresh Chinese stimulus package, much like the one launched at the start of the global financial crisis, Beijing quickly switched gears to quell such speculation. The state-run Xinhua news agency said that there was no new stimulus in the works. The 2008-9 surge in spending led to stubbornly high inflation and worrisome bank debts that the government is still trying to manage. Nevertheless, many analysts believe the government will step up its efforts to bolster the economy by spending more on policy priorities, such as the construction of affordable housing and investment in renewable energy. Pre-emptive, targeted fine-tuning of macroeconomic policy has already started, especially with a series of measures to stabilise investment. As that impact is felt, the economy will stabilise," Mr Zhang said. The official Chinese PMI has held up better than a similar but separate survey that is sponsored by HSBC. A preview of the HSBC China manufacturing PMI that was released last week showed that it probably fell to 48.7 in May, down from 49.3 in April. Analysts say that the official PMI overstates the role of large companies in the manufacturing sector, and that these have generally fared better than their smaller competitors.