China Manufacturing Slows as Growth Pressures Deepen

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China’s manufacturing slowed further in October, as a property slump and slowdown in investment growth put the world’s second-largest economy on course for the slowest full-year growth since 1990.

The government’s Purchasing Managers’ Index was at 50.8 in October, trailing the 51.2 median estimate of analysts in a Bloomberg News survey and compared with September’s 51.1. Readings above 50 indicate expansion.

A pullback in manufacturing will test the government’s determination to refrain from broad stimulus. The economy expanded 7.3 percent in the third quarter from a year earlier, the weakest pace in more than five years.

“The biggest drivers of growth such as fixed-asset investment are still slowing,” Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd., said by phone from Hong Kong yesterday. “Heavy industries like steel and coal are contracting on lower prices, and the negative impact of the weak property market is becoming more pronounced.”

Growth slowed from September for output, new orders, new export orders, stockpiles and expectations, according to the statement released yesterday.

The economy “still faces some headwinds” although a downward trend is unlikely after the government implemented policies to stabilize growth in the third quarter, the statement said.

Some Headwinds

The PMI result reflects weak demand growth in the economy despite the government’s loosening efforts, Goldman Sachs Group economists including Song Yu in Beijing said in an e-mailed research note.

The official PMI is released by the National Bureau of Statistics and China Federation of Logistics and Purchasing in Beijing. The index is based on responses to surveys sent to purchasing executives at 3,000 companies.

A property downturn dragged the economy to its lowest growth in five years last quarter. China will “stabilize” property-related consumption and make it easier for people to access mandatory housing savings, according to a government statement citing a State Council meeting chaired by Premier Li Keqiang. This came after the central bank on Sept. 30 relaxed mortgage rules for homebuyers who have paid off existing loans.

China will support consumption in six areas, including property, e-commerce, environment-friendly products and tourism, according to the statement.

The preliminary reading of another manufacturing PMI from HSBC Holdings Plc and Markit Economics released last month rose to 50.4 in October from 50.2 in September. The final reading for October is due on Nov. 3.