China factory activity falls back into decline in October

China’s factory activity fell back into contraction in October, official data showed Tuesday, despite Beijing announcing a raft of policies aimed at shoring up the creaking economy.

The official manufacturing purchasing managers’ index — a key measure of factory output — stood at 49.5 in October, below the 50-point mark separating expansion from contraction, the National Bureau of Statistics said.

The reading came after the index edged up to 50.2 in September, having shrunk for five consecutive months.

“In October… the prosperity of the manufacturing sector somewhat returned to decline,” the NBS said.

The world’s number two economy has charted an uncertain recovery from the Covid-19 pandemic as weak consumption and a slow-motion housing crisis weigh on growth.

Beijing said last week it would issue one trillion yuan ($137 billion) of sovereign bonds to boost infrastructure spending, having announced a series of targeted measures over recent months to kickstart economic activity.

“The weak PMI reinforces the case for stronger fiscal policy support,” said Zhiwei Zhang, president and chief economist of Pinpoint Asset Management.

“With the new bond issuance announced recently, the fiscal policy stance has turned more proactive,” he said.

However, “the policies in the property sector need to be fine-tuned to avoid further damage”, he added.

China’s economy grew at a faster-than-expected 4.9 percent in the third quarter.

But Beijing still faces an uphill battle to achieve its stated annual target of around five percent.

A string of defaults has encapsulated chronic issues in its debt-laden real-estate sector, which is responsible for about a quarter of gross domestic product.

State media portrayed the bond issuance as part of a push for “post-disaster recovery and reconstruction”, following a year of extreme weather events.

The notes will be issued in the fourth quarter of this year, according to state news agency Xinhua.(BSS/AFP)