China's latest manufacturing and services activity data, released on September 30, 2024, indicates a continuing economic downturn, prompting calls for stronger policy measures. The official purchasing managers index (PMI) showed a contraction for the fifth consecutive month, with a reading of 49.8, slightly up from August's 49.1 but still below the critical 50-mark that separates growth from contraction.
The non-manufacturing PMI, which includes services and construction, fell to 50.0 from 50.3 in August, with the services subindex dropping to 49.9, highlighting weak consumer demand. In parallel, private gauges of activity also reflected economic weakness, with the Caixin manufacturing PMI decreasing to 49.3 and the services PMI declining to 50.3.
In response to these alarming trends, Chinese policymakers have initiated a series of stimulus measures, including monetary easing and property market support. A recent meeting of top leaders emphasized a commitment to further economic assistance, aiming to stimulate growth amid persistent challenges.
Economists express cautious optimism regarding the government's shift towards more aggressive fiscal policies. However, concerns remain about the effectiveness of these measures in reversing the current economic malaise, particularly given the significant debt pressures and subdued market sentiment.
Analysts suggest that without a comprehensive reform plan to enhance social welfare and consumption, China may face a prolonged recovery period. As the year progresses, expectations rise for a substantial budget revision to support the economy's growth target of approximately 5%, which is increasingly under threat.