China’s Manufacturing Activity Expands in September, Signaling Economic Stability
BEIJING, Sept 30 – China’s factory activity expanded for the first time in six months in September, according to an official survey released on Saturday. This adds to a series of indicators that suggest the world’s second-largest economy is starting to stabilize.
The purchasing managers’ index (PMI), which measures the activity of major manufacturers, rose to 50.2 in September from 49.7 in August, surpassing expectations. A reading above 50 indicates expansion, while a reading below indicates contraction.
The PMI data, the first official statistics for September, is another positive sign for the Chinese economy. Earlier signs of improvement emerged in August, with accelerated growth in factory output, retail sales, and industrial profits. These positive developments come after a slump caused by China’s strict COVID-19 policies earlier this year.
“The manufacturing PMI, plus the good industrial profit figures, suggest that the economy is gradually bottoming out,” said Zhou Hao, chief economist at Guotai Junan International.
China’s non-manufacturing PMI, which includes the service sector and construction, also rose to 51.7 in September, compared to 51.0 in August. The composite PMI, which combines manufacturing and non-manufacturing activity, climbed to 52.0 in September from 51.3.
Economists are now closely watching consumer spending during China’s longest public holiday, Golden Week, which began on Friday. Passenger travel by rail reached a single-day record of 20 million trips, indicating a promising start to what is expected to be the most popular Golden Week in history.
However, policymakers must still address the ongoing debt crisis in the property sector, which has rattled global markets. Despite recent measures to stimulate the property market, including mortgage rate cuts, new home prices fell significantly in August, and property investment continued to decline for the 18th consecutive month. China Evergrande Group, the world’s most indebted property developer, announced that its founder is being investigated for suspected “illegal crimes.”
To ensure that China’s economy reaches the government’s growth target of around 5% this year, analysts believe further policy support will be necessary. Experts expect fiscal policy to become more supportive, but they anticipate this shift to occur next year rather than this year.
“The key issue going forward is whether fiscal policy will become more supportive. I think it will, but timing-wise the change of fiscal policy stance may happen next year instead of this year,” said Zhiwei Zhang, chief economist of Pinpoint Asset Management.
These more stable economic indicators will be welcomed by policymakers as they continue to navigate the challenges posed by the property sector debt crisis. The Asian Development Bank has already revised its economic growth forecast for China in 2023, citing weakness in the property sector.
Reporting by Ryan Woo, Tina Qiao, and Joe Cash; Editing by Michael Perry and William Mallard