China factory activity expands fastest in five months

China's factory activity expanded at the fastest pace in five months in May on an increase in new orders, according to official data. The figures added to the positive outlook over the world's second-largest economy's prospects of regaining momentum in the second quarter, Reuters reported.

The official Purchasing Managers' Index (PMI) was up at 50.8 in May from April's 50.4, according to the National Bureau of Statistics, beating market expectations of 50.6.

In a statement accompanying the data, Zhang Liqun, a researcher at the Development Research Centre said: ''The PMI reading continued to improve in May, indicating that a trend of economic stabilisation is becoming more evident.''

According to commentators, as one of the first leading indicators gauging economic momentum, the improved reading could augur well for other May data, boosting market expectations that the economy was regaining some strength as the government's pro-growth measures started kicking in.

According to the official survey, a broad-based recovery in manufacturing activity in May, was underway with nine out of the 13 sub-indicies pointing to improvement from the previous month.

A sub-index for new orders, a measure of foreign and domestic demand was up at 52.3 in May from 51.2 in April, coming in at the highest level since last November.

Meanwhile, Nikkei Asian Review reported Hiroshi Watanabe, governor of the Japan Bank for International Cooperation as saying, China's economic growth could be down below 7 per cent in 2014, as the country's export competitiveness started showing signs of decline.

In view of the delays in addressing bad loans at financial institutions as also excessive production capacity, China might fail to secure funding for social security and coping with the rapidly aging population "unless something is promptly done," Watanabe told Nikkei in a recent interview.

He added China would be the first nation to become an aged society before developing into an advanced nation.

There was concern that many elderly Chinese were short of assets, and pension programmes were underfunded.

Watanabe, a former Japanese vice finance minister for international affairs, pointed out that the equivalent of over a 100 trillion yen ($974 billion) might be needed for addressing the country's financial problems, such as for a capital injection into the banking system.