Two closely watched indicators of activity in China’s manufacturing sector diverged on Friday, complicating the outlook for the world’s second-largest economy in September.
Caixin China General Manufacturing’s private purchasing managers index came in at 48.1 for the month, down from 49.5 the previous month and well below the 50-point barrier separating expansion and contraction. The figure was the lowest since a comparable reading in March.
The official state-prepared manufacturing PMI, which puts more emphasis on larger state-owned companies and tends to be more optimistic, reached 50.1 from 49.4 in August. Analysts had forecast 49.5 and 49.6, respectively.
The Chinese economy has faltered in recent months as it has faced repeated flare-ups of Covid-19 with strict lockdowns curbing economic activity. Chengdu, a megacity of 21 million inhabitants in the southwest of the country, was closed for much of September.
The economy has also suffered from a slowdown in the real estate sector, which has caused loan delinquencies in the real estate sector for the country’s four largest banks to rise by 50 percent. Local government financing vehicles have responded with a deluge of spending to bail out provinces struggling for liquidity, the Financial Times reported this month.
The Caixin survey noted that activity was dampened by a decline in new business and falling prices, which fell at the fastest pace since December 2015, when Covid slowed demand.
“The negative impact of Covid controls on the economy is still pronounced,” said Wang Zhe, senior economist at Caixin Insight Group, noting that both supply and demand had declined, the labor market remained weak and business confidence had ebbed.
“Policy implementation should focus on promoting employment, providing subsidies, boosting demand and boosting market confidence.”