6 months ago
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(Bloomberg) -- China’s factory activity continued to contract while the services sector slowed in September, as policymakers prepared an emergency stimulus blitz to revive an economy facing challenges across the board.
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The official manufacturing purchasing managers’ index was 49.8, meaning the sector has now been in contraction since April 2023, bar three months. The non-manufacturing PMI showed construction and services activity lost momentum, after growing last month.
The data shows the economy remained in a slump before Chinese officials announced a broad package of measures aimed at reviving growth. The central bank last week cut key interest rates and freed up cash for banks to boost lending, while the elite Politburo pledged to support fiscal spending and stabilize the beleaguered property sector.
Traders shrugged off the latest dismal data readings, as Beijing’s multi-pronged plan to lift sentiment in the world’s No. 2 economy continued to fuel a rally in stocks. The benchmark CSI 300 Index rose as much as 6.2% on Monday, the most since 2015, while a gauge of developers tracked by Bloomberg Intelligence surged by 11%.
“I don’t think September macro data points are going to matter this time for markets,” said Xin-Yao Ng, director of investment at abrdn Asia Ltd. “It’s all forward looking about what kind of fiscal stimulus comes out.”
What Bloomberg Economics Says...
“The weakness in China’s economy evident in the September PMI data shows why the government has swung into action to support growth... To sustain the boost to confidence, and kindle a genuine recovery, implementation of the measures, particularly on the fiscal front, will be crucial.”
— Chang Shu and Eric Zhu
Read the full note here.
The spotlight is now on what measures the Ministry of Finance might unleash, as officials from other arms of China’s economic universe implement measures to boost the property market and rate cuts. The 24-man Politburo led by President Xi Jinping vowed at a meeting last week to boost fiscal spending, although it offered no specifics.
Reuters reported the Ministry of Finance is planning to issue two trillion yuan ($284 billion) worth of special sovereign bonds this year, with half devoted to boosting consumption.
