Fears of a full-blown market crash have added a new sense of urgency for policymakers in Beijing, with many analysts expecting more support measures to be rolled out within weeks.
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The Standard Bank Purchasing Managers’ Index (PMI), produced by Markit, fell to 48.9 in July from 49.2 the month before, falling below the 50.0 threshold that divides expansion and contraction for the second consecutive month. However, any reading above 50 indicates expansion in the sector.
Markit said that the seasonally adjusted Business Activity Index – which is based on a single question asking respondents to report on the actual change in business activity at their companies compared to one month ago – rose to 63.4 in July from 63.3 in June, its highest reading since September 2006.
However, as in every month since early 2012, businesses cut prices to encourage business – although only slightly. Service providers also recorded strong growth of new export orders, with the weakness of the euro against sterling contributing to the securing of new work from UK clients.
U.S. stocks edged lower on Monday, led by a slumping energy sector as the price of oil continued to fall.
“Going forward, we need to be much more modest on expectations with regard to China growth; that’s just being realistic”, he said.
Reserve Bank Governor Raghuram Rajan, however, indicated that he could go for a rate cut soon if macro-economic data is favourable and monsoon turns out to be good.
Services, which dominate the bloc’s economy, also performed better than first thought.
“While contrasting with continued marginal job shedding in the manufacturing sector, the rise in services employment was enough to result in higher staffing levels overall”, the survey said.
In an acknowledgement of the difficulties that lay ahead, China’s Politburo, the decision-making body of the Communist Party, promised last week to step up policy adjustments to keep growth stable.
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Activity has now risen on a monthly basis throughout the past three years.
