China's Factory Activity Contracts for Fifth Month
TEHRAN (Tasnim) – China's factory activity contracted for the fifth consecutive month in September, and the services sector showed significant slowing, signaling the need for further stimulus as Beijing aims to meet its 2024 growth target with limited time left in the year.
The National Bureau of Statistics (NBS) purchasing managers' index (PMI) rose slightly to 49.8 in September from 49.1 in August.
While this beat the median forecast of 49.5 from a Reuters poll, it remained below the 50-mark that separates growth from contraction.
This is the highest reading in five months.
A separate private-sector Caixin survey and weak service PMIs also highlighted ongoing challenges in China's factory and consumer sectors.
Policymakers have acknowledged "new problems" facing the economy and have called for stronger stimulus measures.
Last week, China rolled out its most aggressive stimulus since the COVID-19 pandemic, leading to the best weekly performance for Chinese stocks in nearly 16 years.
On Monday, share markets extended their rally.
Economists noted some positive signs for manufacturing.
However, questions remain about whether recent policy moves, including relaxed property market restrictions in major cities, will be enough to spur recovery.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, said, "From a macro perspective, these policies are not that important, as these cities account for a small share of the national property market."
"The key policy to address the macro challenge remains to be fiscal," he added.
On Sunday night, the central bank and top financial regulator announced further measures to support the housing market.
Banks were directed to lower mortgage rates for existing home loans by October 31.
The official services PMI fell to 49.9 in September, marking the first contraction since December 2022.
This signaled ongoing weakness in consumer demand.
The Caixin services PMI also showed a slowdown in the sector.
According to Zhao Qinghe, a statistician at the NBS, the decline was due to the end of the summer holiday season and adverse weather conditions like typhoons in some areas.
Meanwhile, the official construction PMI edged up slightly to 50.7 from 50.6 in the previous month.
Reuters reported that 1 trillion yuan from special bonds will be used to subsidize consumer goods replacement programs and business equipment upgrades.
Another 1 trillion yuan from a separate debt issuance will help local governments manage their debt burdens, according to Reuters.
Officials said the program has already boosted sales in the automotive, home appliance, and home decoration sectors.
China's property downturn continues to impact the broader economy.
At a Politburo meeting last week, top leaders called for measures to stabilize the housing market.
Megacities like Shanghai and Shenzhen are planning to lift key home purchase restrictions in the coming weeks, following similar moves by smaller cities.
On Sunday, Guangzhou lifted all home purchase restrictions.
"Attention now shifts to the equity market, particularly property sales and consumption during Golden Week," said Zhou Hao, chief economist at Guotai Junan International.
Chinese households are preparing for the seven-day Golden Week holiday, starting on Tuesday.
The exchange rate stood at $1 = 7.0146 Chinese yuan.