China manufacturing activity shrinks for 3rd straight month

BEIJING - Agence France-Presse

In this Oct. 11, 2015 photo, a woman works with equipment in a factory manufacturing solar power panels in Shangrao in central China's Jiangxi province. AP Photo

Activity in China’s vast manufacturing sector shrank in October for the third straight month, officials said on Nov. 1, fuelling fears that growth in the world’s second largest economy is slowing faster than policymakers admit.

The Purchasing Managers’ Index (PMI), tracking activity in the factory and workshop sector, was unchanged from the previous month at 49.8, the state statistics office said.

A PMI figure above 50 signals expanding activity while anything below indicates shrinkage.

The economy grew at 6.9 percent between July and September this year, according to official figures, the slowest pace since the aftermath of the global financial crisis in 2009.

But many analysts believe China’s actual growth is significantly lower, pointing to weakness in trade data and to alternative indicators such as the PMI.

Beijing says growth will slow as the economy transitions from reliance on investment and exports towards consumption, but it will avoid a “hard landing.”

The government has taken a series of measures to stimulate growth. On October 23 it abolished the official cap on interest rates for savers and cut interest rates by 0.25 percent, the sixth reduction in a year.

But government intervention intended to halt a stock market rout this summer has increased doubts over policymakers’ competence in managing a transition to a more market-based economy.

The latest figure shows ongoing “sluggish” economic activity, Australian bank ANZ said in a statement.

“While the PMI has stabilized, it is too early to confirm a bottoming out,” it said, adding that further monetary easing was likely.

A survey of China’s real estate sector, a pillar of the economy in recent decades, showed modest price increases.

The average price of a new home in 100 major cities rose by about two percent in October compared to the same month last year, according to the China Index Academy.

The month-on-month increase from September was a more modest 0.3 percent as average prices reached 10,849 yuan ($1,700) per square meter.

The Academy added that recent interest rate cuts had increased sales.

Analysts estimate that the booming property sector contributed around 15 percent of China’s growth in recent years.

But like manufacturing it has faced downward pressure, with some cities suffering from a housing glut.