The manufacturing division activity in China shrank in March successively for the fifth month, as showed by the preliminary HSBC survey.  Purchasing Managers Index (PMI), the indicator of China's industrial activity, fell from 49.6 in February to 48.1, raising a lingering concern about an imminent hard landing.

The headline PMI for March is the lowest since last November and that has certainly diminished expectations of a recovery in the manufacturing sector.

The manufacturing sector of China is a huge driving force behind the economic advances the country has attained. The US and the eurozone are two major markets for Chinese goods. However, the financial crisis has made a serious dent in these two markets, which in turn has affected exports from China.

The highly export-dependent economy of China is by all means feeling the stress of reduced sales in major markets. Premier Wen Jiabao announced at the annual meeting of the National's People's Congress in Beijing in the beginning of March that China would target an economic growth of 7.5 percent in 2012, which is a clear decrease from the rate of growth of the last few years.

China had a trade deficit of $31.48 billion in February states the data revealed by the General Administration of Customs. The imports for February came to a total of $146 billion, while exports were $114.5 billion.

Capital Economics says the data show that conditions in the manufacturing sector remain soft. But fears of a hard landing also seem overdone, given that the monetary conditions have started easing significantly only in the last few weeks.

Growth in Q1 was always expected to be weak, but it should rebound slightly in Q2. That said, the weak PMI figures are another reason to expect policymakers to ease monetary policy further. Capital Economics has also forecast that the required reserve ratio will be cut again in the coming weeks.