China’s manufacturing sector unexpectedly slipped back into contraction territory in October, as reported in an official factory survey on Tuesday, raising concerns about the recent signs of a fragile recovery in the world’s second-largest economy.
The official Purchasing Managers’ Index (PMI) for October dropped to 49.5, down from 50.2, falling below the critical 50-point threshold that separates economic contraction from expansion. This figure also missed the anticipated reading of 50.2.
Since June, Chinese policymakers have introduced a series of measures aimed at shoring up economic growth. These measures include modest interest rate reductions, increased injections of cash into the economy, and more assertive fiscal stimulus.
However, analysts suggest that additional policy support may be necessary to ensure that the economy achieves Beijing’s annual growth target of approximately 5 per cent.
In the preceding week, China’s top parliamentary body greenlit a 1 trillion yuan ($137 billion) sovereign bond issuance in the fourth quarter and passed legislation permitting local governments to bring forward a portion of their 2024 bond quotas to bolster investment and economic growth.
Earlier in the month, the central bank initiated its most important cash infusion since late 2020 through short-term policy loans, with the aim of enabling banks to extend credit and maintain low-interest rates.
Despite the faster-than-expected growth of China’s economy in the third quarter, positive surprises in consumption and industrial activity last month, suggesting that the recent wave of policy measures has been supporting a tentative recovery, several challenges persist. A prolonged property crisis continues to hinder the economy, and the deceleration in global growth further complicates the efforts of authorities seeking to stimulate momentum.
