China enters 2014 with reform hopes

Although China's economy managed to end a somewhat turbulent 2013 on solid footing, a shaky start this year, as shown in new manufacturing data, has renewed worries over its growth prospects.

The flash reading for the China manufacturing Purchasing Managers' Index (PMI) dropped to 49.6 in January, falling below the 50-threshold that demarcates expansion and contraction and marking the lowest point in six months, a preliminary HSBC survey showed.

As the first available hint on economic performance for the new year, the data does not bode well for the world's second-largest economy as 2014 marks the first year for China to deliver its reform promises, entrenching doubts among some skeptics that the country may still face the likelihood of falling into a "middle-income trap" or even experiencing a hard landing.

The HSBC data came on the heels of China's growth figure that showed the economy expanding 7.7 percent in 2013, overshooting the official target of 7.5 percent.

The government has yet to announce its 2014 growth target, which analysts widely expect to be set at 7 percent or 7.5 percent.

But as the focus of the authorities is now turned to forging a more sustainable model, the task this year -- the search for a "golden balancing point" -- requires more sophisticated consideration and efforts.

Although the headline GDP growth remains stable, analysts have already noted an easing trend in the sequential growth momentum since the fourth quarter last year.

"The drop in HSBC PMI reinforces the trend of softening growth momentum, and we expect the momentum to ease further to 7.2 percent on a quarterly basis in the first quarter of 2014 and 6.8 percent in the second," said a J.P. Morgan research note.

The bank attributed the slowdown partly to China's adjustment of policy focus from growth to structural reforms, including allowing a slower pace of credit growth to contain government debt.

The new policy stance was made clear at an annual tone-setting economic conference last year in which the government pledged to maintain continuous and stable economic policy while pushing forward reforms to achieve "reasonable growth" this year.