China’s manufacturing may shrink for a fourth month in February, indicating the world’s second- biggest economy remains vulnerable to a deeper slowdown as Europe’s crisis caps exports and the housing market cools.

The preliminary 49.7 reading of an index from HSBC Holdings Plc (HSBA) and Markit Economics today compared with a final 48.8 in January. A number below 50 points to a contraction. January and February economic data are distorted by a weeklong holiday.

China is cutting banks’ reserve requirements from Feb. 24 to support an economic expansion that Nomura Holdings Inc. estimates may be 7.5 percent this quarter, the least since the global financial crisis. In today’s report, a measure of export orders fell to an eight-month low, underscoring Commerce Minister Chen Deming’s Feb. 9 caution that the government is not optimistic about the outlook for trade after a decline in shipments in January.

“With a meaningful rebound of domestic demand not in sight, external weakness is starting to bite, adding more downside risks to growth,” said Qu Hongbin, a Hong Kong-based economist for HSBC. The central bank “should step up policy easing as inflation pressures continue to ease,” he added.

The Shanghai Composite Index rose 0.9 percent, on speculation that Shanghai will relax property curbs, and the MSCI Asia Pacific Index climbed before U.S. home sales data.

‘Soft Landing’
“Although the rate of GDP growth in China is starting to slow, we predict a soft landing with growth around 8 percent this year,” Sam Walsh, the Australia chief executive officer for iron-ore exporter Rio Tinto Group (RIO) told reporters in Perth yesterday.

In the euro area, where Greece yesterday secured a second bailout package, an index for manufacturing and services unexpectedly indicated a contraction.

In the U.S., meanwhile, home sales may have climbed in January to the highest level since May 2010, adding to signs that the property market is starting to recover, a separate survey indicates.

Today’s report from China “suggests activities remained weak despite the expected recovery post the Chinese New Year,” said Chang Jian, an economist at Barclays Capital in Hong Kong who formerly worked for the Hong Kong Monetary Authority and the World Bank. “We expect export growth to halve in 2012 from last year’s pace.”

Australia, Japan
Elsewhere in the Asia Pacific region, Australian wage growth quickened on the nation’s mining boom. The wage price index advanced 1 percent in the final three months of 2011 from the prior quarter, when it rose 0.7 percent, the statistics bureau said in Sydney today.

In Japan, a finance ministry official said last night that the nation bought 100 million euros ($132 million) of 1.99 billion euros of European Financial Stability Facility bonds sold yesterday. He spoke on condition of anonymity because of the ministry’s policy.

China’s preliminary manufacturing data, called the Flash PMI, is from 85 percent to 90 percent of responses to a survey of more than 400 companies. A separate PMI (CPMINDX) from the logistics federation and the National Bureau of Statistics, which has a different sample and methodology, showed an expansion in January.

China’s exports and imports fell for the first time in more than two years in January, while home prices failed to rise in any of 70 cities monitored by the statistics bureau. Economic data in the first two months of each year is distorted by a weeklong Lunar New Year holiday, which was in January this year and February in 2011. Qu cited “quickened production” after the festival as a reason for the gain in the manufacturing gauge from last month.

The central bank announced a half-point reduction in reserve requirements on Feb. 18 to spur lending while leaving interest rates unchanged amid concern over inflation pressures. Gross domestic product expanded 8.9 percent in the fourth quarter of 2011 from a year earlier.