China’s manufacturing activity declined in September for the fifth successive month while the services sector stagnated, according to surveys of business owners. The data, the latest sign that China will struggle to meet its growth target of around 5 per cent in 2024, come amid a blizzard of stimulus measures from Beijing.
The official manufacturing purchasing managers’ index (PMI), a survey of sentiment among factory owners, was 49.8 in September, the fifth month in a row it has been below 50, indicating falling activity. The non-manufacturing PMI, which includes services and construction, fell to 50 from 50.4, indicating stagnation.
The Caixin manufacturing PMI, which focuses on privately-owned businesses, fell to 49.3 in September from 50.4 in August. Caixin’s services index was also down to 50.3 in September from 51.6 the previous month.
Wang Zhe, senior economist at Caixin Insight Group, said the manufacturing PMI was at its lowest since July 2023, reflecting the weakness of the environment for Chinese manufacturers.
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“The market was characterised by diminished demand coupled with fierce competition. The gauge for total new orders fell into contractionary territory, reaching the lowest since September 2022, with demand for investment products suffering the sharpest decline,” he said.
“Overseas demand contracted too. The corresponding indicator remained in negative territory for the second straight month, dropping to a 13-month low. In light of the notable decline in demand, existing orders were a major driver of production.”
Dr Wang said that, as new orders have fallen, factories have been laying off workers so that the manufacturing labour force shrank in September for the 12th month out of the last 13. Domestic demand remains weak and exports are also under pressure in a “complex and severe” external trade environment.
“On the policy front, measures currently in the works should be sped up to take effect sooner, while the need for additional policies has only grown more urgent,” he said. “Currently, there is relatively sufficient policy space. Fiscal and monetary policies should play a greater role in safeguarding people’s livelihoods, improving the job market and stimulating demand.”
China’s central bank last week unveiled a raft of measures aimed at lifting the country’s ailing property market, which has been in a slump for the past three years. Other measures will make it easier for companies to buy back shares. Those announcements triggered a surge in Chinese equities.
The politburo, which is the leadership group of the Chinese Communist Party, last week pledged further measures to shore up the property market and boost consumer confidence. Residential property prices in China fell in August at the fastest pace in nine years and sales of homes has dropped 18 per cent in the first eight months of this year.
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