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China's manufacturing activity has been contracting since January, a miserable trend highlighted by today's purchasing managers' index figure. Against this nerve-wracking backdrop, Chinese Finance Minister Lou Jiwei did something that was once unthinkable for a senior official.

Earlier this month, Mr. Lou declared that the economy did not necessarily have to meet the government's growth target for this year of 7.5 per cent, provided it creates enough jobs. He even provided the number: 11 million.

"Let's say for instance, this year's economic growth is not 7.5 per cent, but 7.3 per cent or 7.2 per cent. Does this count as around 7.5 per cent? Yes, it counts," Mr. Lou insisted. "Whether GDP growth is to the left or to the right of 7.5 per cent, that is not very important. What is important is job creation."

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Now we know why the Communist leadership has suddenly become flexible about this whole growth thing after meeting its annual target for 25 consecutive years, by whatever means necessary. The economy is showing disturbing signs of a pronounced slowdown, one that has already prompted official talk of a return to heavy infrastructure investment. If the trend continues and that all-important job creation number begins to look elusive, Beijing is almost certain to launch a new wave of stimulus spending.

The latest downbeat news comes from the struggling manufacturing sector, which has been heading in the wrong direction for months. The purchasing managers' index compiled by HSBC/Markit slid this month to 48.1 from 48.5 in February, its lowest level in eight months. Anything below 50 signals contraction. The preliminary reading is particularly troubling, because the economy typically strengthens once the Chinese New Year holiday (which puts a severe dent in output) is out of the way.

Earlier, trade data revealed the biggest drop in exports and weakest manufacturing growth for the first two months of the year since the depths of the Great Recession in 2009.

Add in a raft of less than stellar results for some of China's leading corporate lights and you have the makings of a major headache for Chinese officials. The market-disappointing heavyweights include the likes of China Mobile, with its first drop in profit in nearly 15 years and China Resources Enterprise, whose annual profit plunged by more than 50 per cent from the previous year.

No wonder the State Council declared last week that it would "seize the moment to roll out already determined measures in expanding domestic demand and stabilizing growth." How, you may ask? By speeding up "preliminary work and construction on key investment projects with timely assignment of budgeted funds." Translation: We're opening the stimulus taps.

So far, though, officials are sticking to their vow to impose greater financial discipline, curb credit growth and allow a smattering of debt-ravaged companies to go bust. These are among a range of reforms designed to shift the economy away from its heavy dependence on manufacturing exports toward a more sustainable mix that includes larger consumption and services components.

But much depends on preventing the slowdown from turning into a rout. For a government whose top priority is always to keep a lid on social unrest, that simply can't be allowed to happen.

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