Demand weak, but services sector still going strong
Activity in China's manufacturing sector fell to a 39-month low in November, official data showed on Tuesday, mainly due to weak demand, both domestically and internationally.
China's official manufacturing Purchasing Managers' Index (PMI), a gauge of factory activity, was 49.6 for November, down from 49.8 for October, according to data released by the National Bureau of Statistics (NBS) on Tuesday.
A reading of over 50 indicates an expansion in activity, while one below 50 indicates contraction.
The decline in manufacturing PMI was caused by several factors, including weak domestic and international demand, as well as the usual reduction in production in winter, Zhao Qinghe, a senior statistician with the NBS, was quoted as saying in a statement posted Tuesday on the agency's website.
Also, enterprises are reluctant to replenish stocks due to pressure from the economic downturn, and this affects manufacturing activity as well, according to Zhao.
However, the sub-indexes measuring November activity in the high-tech, equipment manufacturing and consumer goods sectors were at 53.1, 51.6 and 53.4, respectively, showing that the sectors experienced continuous growth, the NBS said.
"The PMI data indicates the Chinese economy is still facing considerable pressure," Liu Xuezhi, an analyst at Bank of Communications, told the Global Times on Tuesday.
Traditional small and medium-sized manufacturing enterprises are facing particular difficulties, Liu noted.
China is struggling to maintain its GDP growth at around 7 percent in the second half of this year, as activity in the manufacturing sector has stayed at a low level during recent months, according to a research note China Merchants Securities Co sent to the Global Times on Tuesday.
More supportive policies will be needed in the coming months to support economic growth, Xu Gao, chief economist with Everbright Securities, said in a research note sent to the Global Times on Tuesday.
The Chinese government has said that the country's annual growth rate should be no less than 6.5 percent in the next five years in order to realize the goal of doubling GDP and per capita income by 2020 from the level in 2010. GDP growth was around 7 percent in the first nine months this year, mainly thanks to strong performance by the financial sector, Xu said.
However, activity in the financial industry has cooled in the fourth quarter, so the government needs to give more support to the real economy or growth will face even greater pressure in the coming months, Xu noted.
The PMI data for November was below expectations, but this will not have a big impact on the market, said Liu Dongliang, an analyst at China Merchants Bank.
"The slow growth will continue in December," he told the Global Times Tuesday.
On the other hand, the PMI for the non-manufacturing sector rose to 53.6 in November from 53.1 in October, the NBS data showed. Non-manufacturing PMI tracks activity in the services and construction sectors.
The sub-index for the services industry rose to 52.8 in November from 52.3 in October. The logistics sector, including express mail, storage and delivery services, saw a boom, mainly due to the effect of the Singles' Day sales promotions for November 11, the NBS said.
The sub-index for the construction industry rose by 1 point from October to 58.1 in November, with construction work having accelerated during the last two months in order to mitigate the effect of the cold winter weather, according to the NBS.
"It's a good sign that the Chinese economy is moving toward a service industry-led model from one based on heavy industry in the past," Liu Xuezhi said. He also noted that the increasing PMI for the non-manufacturing sector indicated that services are taking a greater role in supporting the slowing economy.
China could ease some of the growth pressure by focusing on development of the manufacturing sectors that are in line with domestic consumption and upgrading of the nation's industrial structure, the note from China Merchants Securities said.
