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China manufacturing dips to a nine-month low in August | China manufacturing dips to a nine-month low in August |
(36 minutes later) | |
China's manufacturing activity fell to a nine-month low in August, adding to fears that its economy is slowing faster than estimated. | China's manufacturing activity fell to a nine-month low in August, adding to fears that its economy is slowing faster than estimated. |
The official Purchasing Managers' Index (PMI) fell to 49.2, the lowest reading since November 2011, data released over the weekend showed. | The official Purchasing Managers' Index (PMI) fell to 49.2, the lowest reading since November 2011, data released over the weekend showed. |
PMI is a key gauge of manufacturing activity and a reading below 50 shows contraction. | PMI is a key gauge of manufacturing activity and a reading below 50 shows contraction. |
Analysts said China was being hurt by a slowdown in global and domestic demand. | Analysts said China was being hurt by a slowdown in global and domestic demand. |
"China's manufacturing sector continues to struggle, weighed down by a significant domestic slowdown, a wholly unsupportive external climate and a completely insufficient policy response," Alistair Thornton of IHS Global Insight said in a note after the data was released. | "China's manufacturing sector continues to struggle, weighed down by a significant domestic slowdown, a wholly unsupportive external climate and a completely insufficient policy response," Alistair Thornton of IHS Global Insight said in a note after the data was released. |
'Behind the curve' | 'Behind the curve' |
China's economy saw robust growth in the past few years, boosted in part by record lending by Chinese banks. | China's economy saw robust growth in the past few years, boosted in part by record lending by Chinese banks. |
However, the credit boom resulted in a surge in property prices leading to fears over asset bubbles and concerns over whether credit-fuelled growth was sustainable in the long run. | However, the credit boom resulted in a surge in property prices leading to fears over asset bubbles and concerns over whether credit-fuelled growth was sustainable in the long run. |
That prompted policymakers to introduce various measures to curb lending. | That prompted policymakers to introduce various measures to curb lending. |
Analysts said that while the moves had helped to keep asset prices in check, they had impacted the country's economic growth. | Analysts said that while the moves had helped to keep asset prices in check, they had impacted the country's economic growth. |
China's economy grew at an annual rate of 7.6% in the second quarter, the slowest pace of growth in three years. | China's economy grew at an annual rate of 7.6% in the second quarter, the slowest pace of growth in three years. |
"The government has underestimated the pace of the slowdown and is behind the curve," said Mr Thornton at IHS Global Insight. | "The government has underestimated the pace of the slowdown and is behind the curve," said Mr Thornton at IHS Global Insight. |
Less effective tools? | |
Prompted by fears of a sharp slowdown in the economy, China has taken some measures to ease its policies in a bid to spur growth. | |
China's central bank, the People's Bank of China has lowered the amount of money banks must keep in their reserves, thrice in the past few months, in a bid to boost lending in the country. | |
It has also cut interest rates twice since June this year, to bring down the cost of borrowing for businesses and consumers. | |
However, those measures seem to have had little impact on growth. | |
Analysts said this was because Chinese banks were not too keen to lend money, not least due to fears over slowing growth. | |
"Banks are not willing to make any large, long-term loans. They are worried about the health of the economy," Mark Matthews of Bank Julius Baer told the BBC. | |
"Their non-performing loans are also picking up, making them even more cautious about lending in an uncertain economic environment." | |
He explained that until the banks start to lend money to businesses, the central bank's tools may prove to be ineffective. |