BEIJING (TheStreet) -- The first month-on-month improvement since last fall for China's Purchasing Managers' Index suggests the government has thus far safely controlled the country's economic slowdown.

But a risk of losing control hung in the air Tuesday after Beijing authorities posted a March PMI reading of 50.3, up from 50.2 in February. The monthly index had been falling since November.

One reason for worry was Beijing's official data clashed sharply with a similar report released Tuesday by the bank HSBC (HSBC), which posted a separate PMI reading of 48, down from 48.5 in February and the lowest in eight months. An index below 50 means business is shrinking.

HSBC's chief economist for Greater China, Hongbin Qu, said the bank's survey "confirmed the weakness of domestic demand conditions" and raised expectations the Chinese government might "fine-tune policy sooner rather than later to stabilize growth."

Some analysts have suggested "fine-tuning" might come in the form of government stimulus, but to date Beijing has shown little interest expanding public spending beyond existing transportation infrastructure and low-income housing projects. Debt linked to a 4 trillion yuan stimulus program after the 2008 global financial crisis still haunts local governments nationwide. 

That the central government is not afraid to let the economy cool was highlighted last week when Premier Li Keqiang promised in a speech a "steady and smooth... but not without risk" economy for the coming year. What Beijing wants most, Li said, is stability rather than fast growth.

Moreover, the Communist Party has been pushing since last year for more market-oriented policies. One example is a recent decision to let the state-run oil company Sinopec (SHI) sell some of its retail assets to private investors, perhaps starting this month.

Last week, the state-run investment bank China International Capital Corp. forecast a 2014 GDP growth rate of 7.3%, significantly short of the 7.5% goal set earlier this year by the government. Last year's GDP growth rate was 7.7%.

Another cause for worry over the government's ability to manage the downturn is rising exports helped push the official PMI higher, according to underlying data used by the government's National Bureau of Statistics and the China Federation of Logistics and Purchasing, which jointly calculate the index.

Officially, the government has been trying to wean the economy off China's long-time reliance on exports while boosting the consumer economy. But the Chinese currency's depreciation against the U.S. dollar last month, tied to a government loosening of foreign exchange rules, might have the opposite effect by lowering prices for Chinese-made goods overseas.

Among the purchasing managers surveyed for the official PMI, expectations of new sales orders overseas for manufactured products increased the export portion of the index by nearly 2% from February.

Meanwhile, generally weak PMI figures since last fall have raised fears of price deflation, according to Cai Jin, vice president of the logistics federation. He told the official Securities Times newspaper that "although there is no deflation now, this is the trend" and "a constant concern."

Economist Zhang Liqun of the Development Research Centre of the State Council told the newspaper that according to the official PMI survey, prices of raw materials "declined significantly" last month. Meanwhile, the official purchasing price index fell more than 3.3% from the month before to a steeply contracting reading of 44 in March.

Other data used to calculate the index point to a steady reduction in order backlogs and labor demand among the 3,000 companies surveyed by Beijing. Cai said demand for manufactured products among Chinese consumers has "stabilized" but is not entirely reflected in PMI because online shopping statistics are not factored into the calculations.


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