BEIJING: China’s factory activity experienced a slowdown in September, as revealed by a private-sector survey conducted by Caixin and S&P Global. The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) fell to 50.6 in September from the previous month’s 51.0, missing analysts’ forecasts of 51.2. The index, where the 50-point mark separates growth from contraction, indicated a less robust expansion in the manufacturing sector.
While the world’s second-largest economy has shown signs of stabilization after implementing modest policy measures, challenges persist. A property market slump, declining exports, and high youth unemployment continue to cloud the economic outlook. Despite China releasing its official PMI, showing the first expansion in factory activity in six months in September, the Caixin survey revealed concerns about sluggish external demand. Factory output and new orders remained in the expansionary territory, but weak external demand, particularly evident in the contraction of the export orders index for the third consecutive month, raised concerns.
Economic Challenges for China
Wang Zhe, a senior economist at Caixin Insight Group, highlighted the challenges faced by the Chinese economy: “The economic recovery has yet to find a solid footing, with insufficient domestic demand, external uncertainties, and pressure on the job market.” Additionally, factory owners’ confidence for the year ahead reached a 12-month low, leading to workforce reductions in various sectors.
Moreover, rising input costs posed concerns, increasing at the fastest pace since January due to elevated prices of chemicals, crude oil, and industrial metals. While the central bank took measures in September, reducing the required reserve ratio for banks, analysts are urging for more aggressive steps to support growth.
S&P Global Ratings noted the shift away from debt-fueled growth, indicating that while muted policy stimulus might lead to challenges for corporates and banks, it demonstrates China’s move toward a more sustainable economic model.
In a separate PMI report by Caixin/S&P Global on Sunday, it was revealed that China’s services activity expanded at the slowest pace this year in September, further underscoring the challenges faced by the broader economy.
