China's manufacturing contracted for a second month in Decemberas global growth faltered and Premier Wen Jiabao prolonged acrackdown on speculation in the housing market.

The index was 48.7 in December, HSBC Holdings Plc and MarkitEconomics said today. That compared with a preliminary result of 49reported on Dec. 15 and a final reading of 47.7 for November. Areading above 50 indicates expansion.

The central bank may cut lenders' reserve requirements before aLunar New Year holiday starting Jan. 23 that will fuel demand forcash, according to Bank of America Merrill Lynch. Last month's halfpercentage-point reduction, the first since 2008, indicated thatthe government is putting a bigger focus on supporting growth asinflation cools.

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