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| China manufacturing dips to a nine-month low in August | China manufacturing dips to a nine-month low in August |
| (34 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? | 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. | 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. | 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. | 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. | 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. | 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. | "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. |
| Also adding to banks' concerns are fears that the record lending over the past few years may result in a rise in bad loans and hurt their profits. | |
| "Past experience has taught us that a bad loan crisis usually came three years after a period of abnormal credit surge," Wei Guoxiong, chief risk management official with the Industrial and Commercial Bank of China was quoted as saying by the Xinhua news agency. | |
| "There will be a notable rise in bad loans in the banking sector this year." | |
| Mr Matthews of Bank Julius Baer said these worries had made the banks "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. | He explained that until the banks start to lend money to businesses, the central bank's tools may prove to be ineffective. |