China manufacturing shrinks at fastest rate in more than 6 years
China’s manufacturing sector shrunk in September at the fastest rate in more than six years when the global financial crisis was at its peak in early 2009, according to a preliminary factory survey.
The flash Caixin China general manufacturing purchasing managers’ index (PMI) dipped to 47 points in September, down from 47.3 in August — the worst performance for the sector in 78 months.
A reading above 50 suggests improving conditions while a reading below 50 signals deterioration. The index has now indicated contraction in the sector for seven consecutive months.
"The weaker-than-expected China Caixin manufacturing PMI will add to mounting concerns over Chinese growth, but it is still too early to tell whether or not the Chinese economy has stumbled in September. Today’s PMI reading may well signal a weakening in economic momentum this month," commented Julian Evans-Pritchard, an economist with Capital Economics. "But at the same time, we would caution against giving the PMI too much weight. Its recent weakness — it fell to its lowest since 2009 in August — has not been corroborated by the broader activity data, which currently don’t point to a deepening economic crisis. We expect a cyclical recovery in economic activity over the coming quarters, with most of the key leading indicators such as fiscal spending and credit growth now looking supportive."
"The decline indicates the nation’s manufacturing industry has reached a crucial stage in the structural transformation process," Dr. He Fan, chief economist at Caixin Insight Group, said. "Overall,
the fundamentals are good. The principle reason for the weakening of manufacturing is tied to previous changes in factors related to external demand and prices. Fiscal expenditures surged in August, pointing to stronger government efforts on the fiscal policy front. Patience may be needed for policies designed to promote stabilization to demonstrate their effectiveness.”
Xi Jinping, China's president, delivered a speech Tuesday evening in Seattle at the start of a state visit to the US in which he sought to reassure Americans on a broad range of contentious issues, including the health of the Chinese economy.
The president said the economy was still “operating within the proper range” and defended Beijing’s intervention in the stock markets over the summer as necessary to “prevent massive panic.”
Pic above of President Xi Jinping delivering a speech during a welcome banquet in Seattle, 22 Sept, 2015. Source: Xinhua