China PMI shows factory activity shrank again in February

The official Purchasing Managers' Index inched up to 49.9 in February from January's 49.8

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Hours after China's central bank cut interest rates to battle slowing growth and rising deflationary risk, an official survey showed on Sunday that activity in China's factory sector contracted for a second straight month in February.

The official Purchasing Managers' Index (PMI) inched up to 49.9 in February from January's 49.8, a whisker below the 50-point level separating growth from contraction on a monthly basis, but nevertheless above more pessimistic analyst forecasts for a 49.7 reading. The new reading ended a four-month streak of declining numbers, and the National Bureau of Statistics said the rise should be viewed more positively as it occurred despite the week-long Lunar New Year holiday, during which PMI usually contracts. This year, the holiday was in February.

"In the context of stabilizing macroeconomic policies including recent tax cuts and increased infrastructure spending, market demand rose and business confidence strengthened," the NBS said, adding that stabilizing crude oil and raw material prices were also important factors.

The services PMI showed growth in that sector picked back up to 53.9, up from 53.7 in January, which the NBS attributed in part to strong holiday spending.

Accounting for 48 per cent of China's $10.2 trillion economy last year, the services sector has weathered the growth downturn better than factories have, partly because it depends less on foreign demand.