The official Purchasing Managers’ Index(PMI) was at 49.8 in October, the same pace as in previous month and lagging market expectations of 50.0.
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Chen Zhongtao, analyst with the China Logistics Information Centre, said the overall index indicated that the stabilising trend of economic growth continues under government measures to inject liquidity and facilitate trade.
“As deflation risks intensify, a further RRR cut before end of this year is still possible”, ANZ said, referring to reducing the amount of reserves that banks must hold in order to free up more funds for new loans. Any reading lower than 50 suggests contraction and more than the mark suggests an expansion on a monthly basis.
A new report released by the Chinese government says the country’s manufacturing activity has decreased for the third month in a row.
Faced with persistently weak demand, factory owners continued to lay off workers and at a slightly faster pace than in September.
It is the third consecutive month that the PMI has shown a reading of below 50.
“Financing difficulties are still a major issue for SMEs”, said Chen. “The percentage of small companies facing a financial strain is considerably higher than that of bigger companies”.
Earlier this week growth figures showed the country’s economy growing at a rate of 6.9%, the weakest rate since the financial crisis.
But intervention meant to halt a stock market rout this summer has increased doubts over policymakers’ competence in managing a transition to a more market-based economy.
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Beijing has also ramped up infrastructure spending and eased restrictions on home purchases to revive the flagging property market. The contraction is factory activities injects further fears that the economy might further cool down in the last quarter of the year.
