China’s factory activity in September shrank for the fifth straight month while the services sector slowed sharply, together with the ailing housing market hint that even more stimulus is needed to hit Beijing’s 2024 growth target with only three months left in the year.
The Purchasing Managers’ Index (PMI) released on Monday by the National Bureau of Statistics (NBS) nudged up to 49.8 in September from 49.1 in August, beating a median forecast of 49.5 in a Reuters poll. The reading was the highest in five months.
The September reading of the non-manufacturing PMI, which includes services and construction, dropped to 50.0 from 50.3 in August, marking the lowest in 21 months. The services PMI fell to 49.9, the first contraction since December last year, although the construction PMI shot up to 50.7 from 50.6 in the prior month.
The data showed China’s sprawling manufacturing industry remains a major concerns for policymakers who acknowledged the economy faces “new problems” and have called for more forceful stimulus.
The central bank and top financial regulator on Sunday night unveiled more sweeping measures, including asking banks to lower mortgage rates for existing home loans before Oct. 31. Last week, China’s top leaders met at a Politburo meeting, calling for efforts to stop the decline in the housing market.
Megacities Shanghai and Shenzhen to lift key home purchase restrictions in coming weeks, joining a long list of smaller cities that have done so, according to a Reuters report.
Authorities last week also launched the country’s most aggressive stimulus package since the COVID-19 pandemic.
It is reported that 1 trillion yuan ($142.56 billion), due to be raised via special bonds, will be used to increase subsidies for a consumer goods replacement programme and for business equipment upgrades.
China also aims to raise another 1 trillion yuan via a separate special debt issuance to help local governments tackle their debt problems.
Analysts believe the stimulus and fiscal package should be enough to deliver growth in line with the “around 5%” target, but the country still needs to tackle issues of weak demand and an increasingly hostile global trade environment.
