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China manufacturing tumbles

August 21, 2015

China's factory activity saw a sharp decline in August, showed an independent survey, adding to growing worries about sputtering growth in the world's second-largest economy. Chinese stocks also extended their losses.

https://p.dw.com/p/1GJCN
China Schiffbauer
Image: picture alliance/dpa/Yu Fangping

The Caixin's Purchasing Manager's Index (PMI), which tracks activity in Chinese factories and workshops, fell from 47.8 in July to 47.1 in August. It is the index's lowest reading since recording a figure of 44.8 in March 2009.

The index is seen as a key barometer of the country's economic health. While a figure above 50 signals growth, anything below that indicates contraction.

The drop in the index adds to mounting concerns about China's economic slowdown. A key driver of global growth, the Chinese economy expanded 7.4 percent last year, its weakest since 1990, and has slowed further this year, growing 7.0 percent in each of the first two quarters.

Weakening growth

Nomura economists said Friday's PMI data suggested growth momentum had weakened in the July-September period. "We expect monetary policy easing to continue," they said in a note.

Julian Evans-Pritchard, an analyst with research firm Capital Economics, blamed the disappointing August PMI reading on last week's massive explosions in the northern port city of Tianjin, which killed at least 114 people and caused more than a billion dollars in financial losses.

Factory closures in Beijing and surrounding areas to ensure blue skies above the notoriously polluted city for a huge military parade next month commemorating victory over Japan in World War II were another factor, he said in a report.

Markets take a hit

Chinese stock markets - which have been extremely volatile in recent months - extended falls after the manufacturing figures were released. Emerging market assets also took a hammering, and oil prices were on track for their longest losing streak since 1986, as fears of a China-led deceleration in global growth gripped markets.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 2.4 percent to its lowest since July 27, 2012, for a weekly loss of 6.1 percent.

Shanghai stocks dropped over 4 percent to below the 200-day moving average for the first time since July 2014. That brought losses for the week to 11 percent. The Hang Seng index in Hong Kong was down 2.4 percent for a weekly loss of 7.4 percent.

European shares also fell sharply, with the Pan-European FTSEurofirst 300 down 1.6 percent to 1,453.62 - the index's lowest level since January.

sri/hg (AFP, Reuters, dpa)