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Chinese Manufacturing Falls into Contraction, While Services Eck Out Weak Recovery By


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By Gina Lee – China’s factory activity contracted in September for the first time since COVID-19 began in 2020, with an electricity crunch inflicting further damage on an economic recovery that is already slowing down.

by the National Bureau of Statistics (NBS) showed that September’s was at 49.6, lower than the 50.1 figure in both forecasts prepared by and reported in the previous month.

The was at 50, higher than the 49.5 in forecasts prepared by and August’s 49.2 figure. Caixin Insight Group stated that the improvement could be attributed to a stronger domestic demand, an increase in orders and continued decline in export sales.

Zhao Qinghe, a senior statistician at NBS said that the contraction could be attributed to a slow performance in energy-intensive sectors. China’s widespread power crisis has forced 20 Chinese provinces to reduce their electricity consumption in September. This is expected to cause slowing economic growth as well as disruption to global supply chains.

The data “offered the first glimpse of the cost from the energy crunch and, for the manufacturing sector, it’s substantial. In manufacturing, the PMI fell into contraction. The services sector staged a comeback but is by no means recovering strongly,” according to Bloomberg Economics’ Chang Shu and David Qu.

Meanwhile, the “weak PMI sent an alarm to the government. The big question is whether the government monetary and fiscal policies will become more supportive now or if the government will wait till the year-end to change the policies,” Pinpoint Asset Management Ltd. chief economist Zhang Zhiwei told Bloomberg.

The NBS data also showed that the PMI was at 53.2, higher than the 47.5 reported in August.

The services sector saw a slight boost in spending due to the Mid-Autumn Festival. Travel and tourism revenues remained at pre-COVID-19 levels. These are signs of consumer confidence remaining low after the COVID-19 crises.

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