China factory index hits 3-year low, but services improve

  • Agencies, Beijing
  • Updated: Dec 01, 2015 10:26 IST
Employees work along a production line at a factory of Dongfeng Nissan Passenger Vehicle Co. in Zhengzhou, China. (Reuters Photo)

China’s manufacturing activity has hit a three-year low despite a flurry of stimulus moves while service industries have improved, an official survey showed on Tuesday.

The official Purchasing Managers’ Index (PMI) slipped to 49.6 in November from 49.8 the previous month. A reading below 50 points suggests a contraction in activity while a reading above signifies an expansion on a monthly basis.

The private Caixin/Markit purchasing managers’ index for manufacturing released the same day also remained at a level indicating contraction, although it improved to 48.6 from 48.3.

The official index, compiled by the Chinese Federation for Logistics and Purchasing, includes more of the country’s larger, state owned enterprises while the Caixin survey is weighted to smaller, private enterprises.

Shifting focus to services

A similar measure covering China’s service industries rose to 53.6 from 53.1.

The latest data highlight the two-speed nature of China’s economy as officials try to shift the economy’s focus from manufacturing to services.

The fall in maufacturing activity for a fourth straight month fuelled fears that the economy may be cooling more rapidly than expected due to subdued demand at home and abroad.

Some analysts expect China’s economy will bottom out in the fourth quarter as a burst of stimulus measures rolled out by Beijing gradually takes effect, but many remain wary about the outlook.

China’s Premier Li Keqiang said last week that China was on track to reach its economic growth target of about 7% this year, and that the economy was going through adjustments to maintain reasonable medium- to long-term growth.

But that would still mark China’s weakest economic expansion in a quarter of a century, and some analysts believe real growth levels are much weaker than official data suggest.

Chinese shares ease

After the weak factory data was announced , shares in Shanghai ended the morning session lower, but Hong Kong rallied after a six-day sell-off.

The benchmark Shanghai Composite Index slid 0.45%, or 15.34 points to 3,430.06, while the Shenzhen Composite Index, which tracks stocks on China’s second exchange, fell 0.42%, or 9.18 points, to 2,194.43.

Hong Kong’s Hang Seng Index rose 1.65%, or 362.60 points, to 22,359.02.

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