China's Factory Woes: Fifth Month of Decline Amid Weak Demand

China's factory activity shrank for the fifth consecutive month in September as the services sector also slowed. The National Bureau of Statistics reported a slight PMI increase to 49.8, still below the growth threshold. This suggests more stimulus is necessary to meet Beijing's 2024 growth targets.

China's factory activity in September shrank for a fifth straight month, with the services sector also slowing sharply, indicating that more stimulus may be needed to achieve Beijing's 2024 growth targets. The National Bureau of Statistics (NBS) purchasing managers' index (PMI) edged up to 49.8 in September from 49.1 in August, still below the 50-mark that separates growth from contraction but surpassing the median forecast of 49.5 in a Reuters poll. The reading was the highest in five months.

Together with a downbeat private-sector Caixin survey also published on Monday, the data showed that China's vast manufacturing industry remains a significant challenge for policymakers, who have acknowledged facing "new problems" and called for more robust stimulus measures. On Sunday night, the central bank and top financial regulator introduced additional measures, including asking banks to lower mortgage rates for existing home loans before Oct. 31.

Last week, authorities launched the most aggressive stimulus package since the COVID-19 pandemic. Reuters reported on Thursday that 1 trillion yuan ($142.56 billion) will be raised through special bonds to boost subsidies for consumer goods replacement and business equipment upgrades. China also plans to raise another 1 trillion yuan via a distinct special debt issuance to help local governments address their debt issues.