China Manufacturing Contraction Boosts Case for Easing: Economy

A Chinese purchasing managers' index signaled manufacturing may contract for a third month as a slowing economy boosts the case for the government to further loosen credit controls.

The preliminary January reading of 48.8 for the gauge, released by HSBC Holdings Plc and Markit Economics today, compares with a final 48.7 number for December. The dividing line between contraction and expansion is 50.

International Monetary Fund Managing Director Christine Lagarde joined global officials today in warning that the world economy is decelerating and faces "significant and urgent challenges." China has allowed its five biggest banks to boost first-quarter lending and may relax capital requirements, people with knowledge of the matter said.

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