Factory growth slows in April

Zhu Ye, manager of Alchemist, a trading company specializing in chemical products in Changshu, Jiangsu province, said inventory pressure continues to grow for most Chinese chemical product manufacturers, largely due to reckless expansion of production capacities.

He predicted a recovery in the market could take three years.

"The reason for such blind expansion was a lack of creativity among Chinese chemical product manufacturers," Zhu said.

"They simply followed the latest trend in other markets and produced new products in bulk in China. If they do not change their policies, they will always feel inventory pressure here."

Fan Jianping, chief economist at the State Information Center, a government think tank, said that downside risks may increase in coming months.

"Demand must be expanded and outdated production capacity closed down, simultaneously, to maintain stable growth."

The sluggish outside market also added to downward pressure on the Chinese economy, illustrated by a drop in the reading for the PMI sub-index on new export orders, which fell to 48.6 from 50.9.

Zhang said the latest economic growth pattern had seen a transformation this year, from a super-high-speed expansion in GDP, to a model which is now focused on quality and efficiency.

"Equipment manufacturing and high-tech industries are presenting good development momentum," he added.

Liu Ligang, chief economist in China with Australia and New Zealand Banking Group Ltd, blamed the weak economic recovery on slower-than-expected fiscal expenditure and investment, which he said may be a sign of the central government's determination to solve the country's structural issues.

"Monetary policy over the next two months is expected to remain relatively loose, and appreciation pressure on the renminbi may be weakened," said Liu.

However, Zhang Zhiwei, Chinese chief economist at Nomura Securities Co Ltd, said policies may be tightened to contain financial risks, and he expects growth to slow throughout 2013.