BEIJING, Sept 30 (Reuters) - China's factory activity in September shrank for a fifth consecutive month, while the services sector also saw a sharp slowdown, indicating that more economic stimulus is necessary to meet Beijing's growth target for 2024. With only three months left in the year, the National Bureau of Statistics (NBS) purchasing managers' index (PMI) rose slightly to 49.8 from 49.1 in August, remaining below the critical 50-mark that separates growth from contraction, although it surpassed the median forecast of 49.5 in a Reuters poll. This marks the highest PMI reading in five months.
The data, combined with a disappointing private-sector Caixin survey released simultaneously, highlights ongoing struggles within China's manufacturing sector, prompting policymakers to acknowledge the economy's 'new problems' and call for more robust stimulus measures.
In response, the central bank and top financial regulators announced significant measures, including a directive for banks to lower mortgage rates for existing home loans before October 31. Additionally, last week saw the launch of the most aggressive stimulus package since the COVID-19 pandemic.
The non-manufacturing PMI, which encompasses services and construction, fell to 50.0 from 50.3 in August, marking its lowest level in 21 months. The services PMI dipped to 49.9, indicating its first contraction since December of the previous year, although the construction PMI increased to 50.7 from 50.6.
According to Reuters, 1 trillion yuan (approximately $142.56 billion) will be raised through special bonds to enhance subsidies for consumer goods replacement programs and upgrade business equipment. Furthermore, China plans to issue another 1 trillion yuan in special debt to assist local governments with their debt issues.
Officials noted that the stimulus efforts have already positively impacted auto sales, home appliances, and home decoration products. However, as the property downturn continues to hinder broader economic recovery, leaders at a recent Politburo meeting emphasized the need to stabilize the housing market.
Major cities like Shanghai and Shenzhen are set to ease key home purchase restrictions in the coming weeks, joining a growing number of smaller cities that have already done so. Analysts predict that the stimulus, along with a new fiscal package estimated at around 2 trillion yuan, should be sufficient to achieve growth in line with the 'around 5%' target, although challenges related to weak demand and a difficult global trade environment still loom.