A worker wearing a face mask works on a production line producing bicycle steel rims at a factory as the country is hit by the novel coronavirus outbreak, in Hangzhou, Zhejiang province, China, March 2, 2020. China Daily via Portal/File Photo Acquire LICENSE RIGHTS
BEIJING, Aug 31 (Portal) – China’s manufacturing activity fell for a fifth straight month in August, an official survey showed on Thursday. This remains pressure on authorities to provide support to support economic growth in the face of weak demand at home and abroad.
On the positive side, new orders were on course for expansion for the first time in five months and factory owners pointed out that producer prices improved for the first time in seven months, although the huge services sector continued to trend downwards.
The official Purchasing Managers’ Index (PMI) rose to 49.7 from 49.3 in July, according to the National Bureau of Statistics, remaining below the 50-point mark that separates contraction from expansion. The value was above the forecast of 49.4.
The PMI provides the first indication of how the world’s second-largest economy fared in August, following a sharp rise in trade, factory and retail data in July. However, in a hopeful sign for growth, conditions did not worsen significantly, although the survey showed factories were under continued pressure.
China’s biggest manufacturing rivals in the region, Japan and South Korea, also reported sharp production declines on Thursday.
“It’s too early to tell, but today’s numbers suggest a sequential pick-up in growth activity in the third quarter could still be possible,” said Louise Loo, senior economist at Oxford Economics.
“Especially when incoming stimulus impacts the economy.”
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The world’s second-largest economy is at risk of missing Beijing’s annual growth target of around 5% as authorities grapple with a worsening housing decline, weak consumer spending and slowing credit growth, prompting major banks to cut their growth forecasts for the year
Over the weekend, China announced a halving of the stock market tax, the first tax cut since 2008, and on Friday adopted affordable housing policies to improve access to mortgages for first homes.
Some Chinese state banks will also soon cut interest rates on existing mortgages, although analysts expect property prices to show no growth this year.
The new moves follow a series of measures aimed at reinvigorating expensive purchases, particularly of new-powered vehicles. Still, many analysts see little chance for drastic stimulus measures amid concerns about growing debt risks.
On Wednesday, Pan Gongsheng, governor of the People’s Bank of China, said at a meeting with banks and private companies that China will open up equity, bond and loan financing channels for private companies and guide institutional investors to buy their bonds.
Policymakers remain under pressure to boost domestic demand as the global economy continues to slow.
Higher interest rates and inflation in the United States, Europe and other key export markets continue to curb demand for Chinese goods. The sub-index for new export orders contracted for the sixth consecutive month.
“Further economic measures may be needed to boost growth,” said Frederic Neumann, chief Asia economist and co-head of global research Asia at HSBC.
“Especially in an environment where new export orders continue to decline due to weak global demand, manufacturers must rely on domestic demand to make up the shortfall.”
The non-manufacturing PMI, which includes sub-indices for services and construction activity, fell to 51.0 from 51.5 in July, reflecting the continued decline in services activity, while the composite PMI, which includes both which includes activity in both manufacturing and non-manufacturing sectors, increased to 51.3 from 51.1.
“Today’s data shows that … the tightening of policy measures is gradually offsetting the near-term factors that have disrupted the consolidation and recovery of the Chinese economy,” said Bruce Pang, chief economist at Jones Lang Lasalle.
Going forward, “the actual implementation and effectiveness of policy support will be the key indicator to monitor,” he added.
Reporting by Joe Cash and Qiaoyi Li; Additional reporting by Ellen Zhang. Edited by Sam Holmes and Shri Navaratnam
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