New Manufacturing Data in China Adds to Growing Concerns About the Economy

Although readings above 50 still indicate an expansion of activity, the fall was more precipitous than forecast by economists, with the October reading being at its lowest since July 2016.

"Overall, the data confirms that economic fundamentals are weakening. I fear that the weakness will last for a long time, "said Yang Weixiao, an economist at Founder Securities.

Indicators and other economic data over the last few weeks have shown that the Chinese economy is falling faster than expected, spurring the government to support growth and make the stock markets talk.

Asian markets, boosted by the rebound in overnight US markets, seemed to be more reflective of the decline in factory activity as Shanghai shares initially weakened and rallied on Wednesday morning.

Zhao Qinghe, an analyst with the government's Bureau of Statistics, said in a statement accompanying the release of the data, a week-long holiday and growing uncertainty about the conditions outside China.

Mr. Yang and other economists have reported signs of further gloom in the latest indicators. A sub-index measuring production went from 53.0 in September to 52.0, while the new orders index went from 52.0 to 50.8. The new export sub-index – an indicator of external demand for Chinese products – rose from 48.0 to 46.9.

Measurement operations for the sub-indices of small and medium-sized manufacturing companies showed a contraction in October compared to September. This is likely due to the regulatory rules issued in July to limit the growing financial risks of non-bank lenders, which essentially cut off the main source of funding for private companies, Yang said.

An official indicator of business activity outside the factories, also released Wednesday, has highlighted a new weakness in the service sector, which has been more dynamic. China's official non-manufacturing PMI fell to 53.9 in October, its lowest level in October, compared to 54.9 in September.

In recent months, Beijing has stepped up efforts to boost economic growth by re-launching infrastructure projects and releasing more funds for banks. Several regulators have increased credit support to ease financing difficulties for private companies. The authorities also announced reductions in tax and tax burdens.

The government's efforts to stabilize economic growth and strengthen forecasts should begin to bear fruit later in the year, said Zhang Liqun, an analyst at the China Federation of Logistics and Purchasing, according to a statement posted on the website. of the group. The industrial group publishes the SMIs at the statistical office.

Mr. Yang, of Founder Securities, said the banks had enough money, but the money was still not paid to small businesses, considered more risky. "If the system does not repair itself, it's hard to imagine things will get better soon," he said.

-Liyan Qi