Surveys of factories in China show a slowing economy as Beijing increases its support

China’s economy has continued to weaken in recent weeks, according to surveys released on Monday, suggesting more support is needed as the government steps up its stimulus measures.

The Caixin Purchasing Managers Survey showed that new manufacturing orders fell at their fastest pace in two years in September.

“Operating conditions in China’s manufacturing sector deteriorated in September after improving in August,” the report said. “In addition, companies reduced their hiring and purchasing activities.”

Market expectations. The problem of insufficient effective domestic demand

remains prominent, with significant pressure on employment and weak

An official survey released by the National Bureau of Statistics showed a less drastic decline, but marked the fifth consecutive month of decline. The purchasing managers’ index was 49.8 in September, up from a six-month low of 49.1 in August. The index is on a scale where values ​​above 50 indicate expansion.

The survey found that factory production rose while new orders fell.

Chinese stock markets jumped on Monday, reflecting enthusiasm over a flurry of policy measures announced last week, including lower interest rates and lower mortgage down payment requirements, as well as cuts to required bank reserves.

“There is no doubt that the coordinated and strong policy stimulus measures announced by Beijing have rightly sparked optimism,” Tan Boon Heng of Mizuho Bank in Singapore said in a commentary.

The smaller main index market in Shenzhen rose 8.2%, while the Shanghai Composite Index rose 5.7%.

“The stimulus package announced last week is expected to boost activity in the coming months,” Gabriel Ng of Capital Economics said in a report. However, he noted that imbalances remain between an oversupply of many products and weak demand. And trade measures against China, such as higher tariffs on electric vehicles and other goods, will also weigh on the economy.

“In this environment, a meaningful economic recovery would require significant fiscal stimulus,” he said. “There is no official announcement on fiscal support yet, although some media reports suggest there may be one soon.”

The story continues

Over the weekend, Beijing pushed ahead with measures announced last week to support the real estate industry and revive flagging financial markets. The central bank announced on Sunday that it would direct banks to reduce mortgage rates on existing home loans by October 31. Meanwhile, the southern city of Guangzhou lifted all home buying restrictions over the weekend, while both Shanghai and Shenzhen announced plans to ease key purchasing restrictions.

Real estate developers have been struggling after the government cracked down on excessive borrowing for projects a few years ago. Property prices have continued to fall and the government has ensured that developers deliver homes that have been paid for but not yet built.

The real estate downturn has impacted the world’s second-largest economy and hit many other industries that depended on booming housing construction, such as manufacturers of home appliances and building materials.

This has slowed China’s recovery from the massive disruption caused by the COVID-19 pandemic and increased pressure on Chinese consumers worried about wage cuts, job losses and weaker asset prices.

The economy grew at a pace of 4.7% last quarter, slightly below the government target of about 5%.

Elaine Kurtenbach, The Associated Press