China's official PMI index fell to 50.6 last month from March's 11-month high of 50.9 and lower than expectations in a Reuters poll of analysts that estimated the figure at 51.
The index remained above the 50 level separating expansion from contraction but export orders fell to 48.6 compared with March's 50.9.
Wei Yao, China analyst with Societe Generale, said the figure added to the "ever-expanding list of data disappointments from China."
In a market note Yao estimates that, in seasonally-adjusted terms, the headline figure fell more, to 48.7 from March's 49.3.
Non-seasonally adjusted, new orders recorded a decline of 0.6 point and employment fell 0.8 point.
Input prices plunged by more than 10 points to 40.1, the lowest point since 2009, Yao noted.
"It is a picture of sluggish demand and deflation, by China's standard," she said.
"This report reconfirmed the disheartening message delivered by the HSBC flash report last week that the call for a Q2 rebound may still be premature."
Mark Williams, chief Asia economist at Capital Economics, says that although at face value the drop in the PMI index in April from May is not too big, April "is normally one of the strongest months of the year, particularly for output."
"The fact that the output component fell at all – from March's 52.7 to 52.6 – is therefore a concern," Williams said. "If the usual pattern holds, output will weaken in coming months."
'THE RULES HAVE CHANGED'
He noted that while in the past such sustained weakness in the data would have been countered by efforts to boost bank lending, now "the rules have changed."
"The current pace of credit growth is already alarmingly high," said Williams, adding that although the employment component fell, "there is little sign of widespread labour market stress."
Yao believes that "the root cause of China's growth disappointment stems from excess capacity, the high corporate debt level and an increasingly marginalized private sector."
These cannot be addressed by cyclical monetary or fiscal easing; therefore the new Chinese leadership seems to be opting for weaker short-term growth but a reduced risk of an economic crisis over the medium term, she said.
"Unfortunately, if we are right about this policy framework change, the implication for the financial market is unpleasant," said Yao.
Until systemic risks are defused, the government is likely to push out measures that are negative to growth, so expectations of economic expansion should be lowered further, she said.
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