A week after China said its 7% growth target was not set in stone, there was more bad economic news, this time from the country’s manufacturing sector.
The latest official purchasing managers’ index came in at 49.8 for October, the same level as September but lower than the expected level of 50. Anything below 50 indicates a contraction and this is the third month in a row this has happened.
Zhao Qinghe, a senior statistician at China’s National Bureau of Statistics, said: “Because of the recent weak recovery in the global economy and downward pressure in the domestic economy, manufacturers still face a severe import and export situation.”
New export orders fell back for the 13th month in a row. It was not just manufacturing which was struggling last month, with the service sector expanding at its slowest pace in nearly seven years.
Last month, the Chinese central bank unexpectedly cut interest rates to try to bolster the country’s flagging economy, and analysts believe further stimulus measures may be necessary. Economists at ANZ Bank said: “As deflation risks intensify, a further [cut in the amount of reserves banks must hold] before the end of this year is still possible.”
Shortly after the cut, China’s premier Li Kequiang said it was not necessary for the economy to grow by the 7% target which had been set in March.
On Sunday, he told a meeting of business leaders in South Korea: “The Chinese economy will maintain a mid- to high-level of growth for quite some time in the future. We will firmly pursue restructuring and reform. There may be fluctuations in economic indicators but there will not be major ones.”
