(MENAFN- AFP) Chinese factory activity weakened further in November, data indicated Tuesday, the latest sign of a growth slowdown but analysts said the nation's inclusion in an elite basket of global currencies was a sign of confidence in the world's number two economy.
The slump to a more than three-year low in Beijing's official purchasing managers' index (PMI) -- which tracks work in the crucial manufacturing sector -- comes as China struggles with annual growth rates not seen in a quarter of a century.
And there is widespread speculation the leadership's target growth rate this year of "about seven percent" might not be met as key sectors underperform, particularly the property market.
"China's manufacturing sector remains sluggish due to the property slowdown," Zhou Hao, a Singapore-based economist at Commerzbank AG, said.
"While property prices are turning around led by first-tier cities, housing investment continues to moderate, reflecting a significant property inventory overhang."
Readings from trade, investment, inflation and consumer spending have also come in below par in recent months despite a series of monetary easing measures including six interest rate cuts in a year.
And the latest soft reading raises the possibility of further steps from Beijing.
"With soft growth momentum and deflation pressures creeping up, we expect the authorities to further ease monetary policy," economists from Australian bank ANZ said in a note.
A separate, private, PMI released Tuesday by Chinese media group Caixin and information provider Markit, with a greater focus on smaller firms, also pointed to extended contraction.
However, away from China's factories, an official gauge of non-manufacturing activity showed the sector expanding.
- 'Positive statement' -
China-watchers said the International Monetary Fund's decision to allow the yuan into its special drawing right (SDR) basket of elite currencies was a crucial thumbs up to Beijing.
The leadership has promised to liberalise its economy allowing market forces to play a bigger role at home, and reforming cumbersome state-backed enterprises that dominate all industries.
"Having the currency in the SDR basket is a positive statement about the progress they have made in terms of reforms in the financial sector,'' Ng Soo Nam, Singapore-based head of Asian equities at Columbia Threadneedle told Bloomberg News.
"This reflects a level of confidence on the robustness of the financial system in China. This will help investor sentiment."
News that the yuan had joined the dollar, yen, euro and pound in the SDR club had little major effect on the currency -- which is still tightly controlled by the central bank -- in Tuesday's trade.
Nathan Chow, a Hong Kong-based economist at DBS Group Holdings, said he expected the People's Bank of China to reduce its interventions in currency markets, which would likely see the yuan soften owing to weaknesses in the economy.
The bank's decision in August to devalue the unit sent shockwaves through global markets in fears Beijing was struggling to get a grip on the country's economic crisis.
Analysts said the SDR move also provided support to regional stock markets, with Hong Kong, Sydney and Seoul up more than one percent while Tokyo added 0.9 percent. But Shanghai slipped 0.5 percent in the afternoon.
Investors are now looking ahead to a string of possible market-moving events, including a European Central Bank policy meeting that could see it unveil a fresh round of monetary easing, a US jobs report and a meeting of the Organization of the Petroleum Exporting Countries.
Federal Reserve chief Janet Yellen will also appear before congress this week, which economists will be closely following to see if she provides any guidance on the bank's plans for interest rates before a gathering in two weeks.
The Fed is widely expected to hike rates for the first time in almost a decade as the US economy shows increasing signs of strength.
The likely divergence of monetary policy in the United States and Europe has put pressure on the euro, which is at its weakest against the dollar since early April.
- Key figures at 0500 GMT -
Tokyo - Nikkei 225: UP 0.9 percent at 19,924.05
Shanghai - composite: DOWN 0.5 percent at 3,428.44
Hong Kong - Hang Seng: UP 1.6 percent at 22,355.55
Euro/dollar: UP at $1.0577 from $1.0570 in New York
Dollar/yen: DOWN to 122.93 yen from 123.12 yen
New York - Dow: DOWN 0.4 percent at 17,719.92 (close)
London - FTSE 100: DOWN 0.3 percent at 6,356.09 (close)
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