There are worrying signs that China's economy will be weaker than expected this year

Picture: AFP / Getty Images

Yesterday’s poor result for Chinese manufacturing data sent jitters across Asian stock markets.

And it may be a warning signal that more economic weakness lies ahead for China’s economy, according to Capital Economics (CE).

Official manufacturing PMIs from the Chinese government fell to 50.3 in February — the lowest level in 19 months and well below market forecasts.

PMI readings range from a score of 0 to 100, with 50 deemed neutral. Anything above 50 indicates that activity levels improved, while a reading below 50 suggests activity levels declined.

So the latest figures from China indicate that manufacturing activity still expanded — but only just. And manufacturing growth slowed notably from a reading of 51.3 in January.

“We think that the survey data may finally be signalling the slowdown in growth that our China Activity Proxy (CAP) has been flagging,” CE’s Kerrie Walsh said.

The CAP is based on a set of five key indicators, including domestic freight volumes across the major transport channels and new floor space under construction.

And CE said it expects growth in China will continue to slow, which will weigh on emerging market stocks in the year ahead.

Stocks in mainland China, Hong Kong and South Korea all closed more than 1% lower in the wake of yesterday’s data miss.

“Looking ahead, some of the weakness in manufacturing may unwind in the next few months as disruptions from the antipollution campaign fade,” Walsh said.

“However, this is likely to be short-lived. We think that growth in China will be weaker than is generally expected this year, reflecting slower credit growth and a cooling property sector.”

Signs of a material slowdown in Chinese economic growth will be closely watched domestically, given the headwinds it may create for Australia’s economy.

Yesterday’s data miss comes as Chinese authorities continue to crack down on rampant credit growth as President Xi Jinping looks to consolidate power for the long-term.

On the manufacturing front, CE’s Walsh noted that markets generally give more weight to the non-government Caixin data.

And in the wake of yesterday’s data miss, the Caixin figures are likely to get closer scrutiny when they’re released later today.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.