24 October 2016
China's factory sector is losing steam. Photo:
China's factory sector is losing steam. Photo:

Cooling economic data suggest hard landing for China

Activity in China’s factory sector shrank at its fastest pace in almost six-and-a-half years in August, a private survey showed Tuesday, stoking investors’ fears that the economy may be lurching toward a hard landing, Reuters reported.

Even more worrying, China’s services sector, which had been one of the few bright spots in the sputtering economy, also showed alarming signs of cooling, expanding at its slowest rate in more than a year, a similar survey showed.

The final Caixin/Markit Manufacturing Purchasing Managers’ index (PMI) dropped to 47.3 in August, the lowest reading since March 2009, from July’s 47.8.

A reading above 50 points indicates growth on a monthly basis, while one below that indicates a contraction.

Employment in the factory sector fell for the 22nd straight month, while new orders shrank for a second month to 46.6, the sharpest contraction since March last year.

“Sub-indices signalled continued weak demand in the market for goods and factors of production,” said He Fan, chief economist at Caixin Insight Group.

A similar survey by Caixin/Markit for the services sector showed growth momentum fell to 51.5, its lowest level since July last year, from 53.8 in July this year.

Employment in China’s services sector fell to 50.1, barely remaining in expansionary territory and posting its slowest pace of growth since August 2013.

Official PMI figures released earlier in the day showed factory activity shrank to a three-year low of 49.7, while growth in services was still robust but cooled to 53.4.

The Caixin surveys tend to focus on small and medium-sized firms, which are facing greater stresses from the economic slowdown, while the official surveys look more at larger, state-owned firms.

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