China's manufacturing sector faces second consecutive month of contraction. Here are the details
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The official Purchasing Managers' Index (PMI), expected to improve slightly to 49.7 from last month's unexpected drop to 49.5, remains below the critical 50-point threshold that separates contraction from expansion.
As November comes to an end, indications suggest that China's manufacturing activity is likely to contract for the second consecutive month, according to a Reuters poll. The official Purchasing Managers' Index (PMI), expected to improve slightly to 49.7 from last month's unexpected drop to 49.5, remains below the critical 50-point threshold that separates contraction from expansion.
While some economists have observed green shoots in mixed October data, the consensus is that the economy is still grappling for traction, with predictions ranging between 49.0 and 50.2 and the majority anticipating a small contraction between 49.6 and 49.8.
The challenges facing China's economy persist despite a series of policy support measures, including the struggle in the property market, risks associated with local government debt, slow global growth, and geopolitical tensions.
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The inability to achieve a robust post-COVID recovery has intensified the call for additional stimulus. Profit growth at China's industrial firms witnessed a slowdown, reverting to low single digits in the last month. Both new export and import orders contracted in October, underlining the headwinds faced by the manufacturing sector.
Analysts warn of a potential stagnation in China akin to Japan later this decade unless policymakers take decisive steps to reorient the economy toward household consumption and market-allocation of resources. While China's central bank governor expressed confidence in the country's healthy and sustainable growth in 2024 and beyond, he emphasised the need for structural reforms to reduce reliance on infrastructure and property for growth.
The government's pursuit of an annual economic growth target of 'around 5 per cent' for next year may necessitate additional stimulus measures, aligning with the goals set for this year.
The official PMI, a crucial economic indicator, is set to be released on Thursday, providing further insights into the state of China's manufacturing sector.
Concurrently, the private Caixin factory survey, scheduled for Friday, is anticipated to show a slight uptick to 49.8 from October's 49.5. The outcome of these reports will likely influence policymakers' decisions as they navigate the complex economic landscape and consider further measures to sustain growth and stability.
(With inputs from Reuters)
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