SHANGHAI — China’s official manufacturing purchasing managers’ index (PMI) dropped 0.3 points to 49.7 in August, providing fresh fears about the health of the Chinese economy and pushing down Asian stocks on Tuesday.
This is the lowest point seen in the index since August 2012 and falls below the 50 mark that separates expansion from contraction. China’s National Bureau of Statistics released the data Tuesday.
The subindex for new orders was also 49.7, down from 49.9 in July, indicating continued challenges in demand.
“Growth momentum was weak in the manufacturing sector,” NBS statistician Zhao Qinghe told Chinese state media.
Asian stocks tumbled. Tokyo’s Nikkei 225 had an especially rough ride, shedding 3.84 percent. Shanghai’s SSE Comp slid 1.23 percent while Hong Kong’s Hang Seng fell 2.24 percent.
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Zhao attributed the PMI decline to factors including the phasing-out of traditional manufacturing, bad weather caused by El Nino, air pollution controls around Beijing, and low commodity prices.
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He also said encouraging signs could be seen in the steady growth of high-end manufacturing and consumer goods production.
Similarly, Capital Economics China economist Julian Evans-Pritchard emphasized the relatively unusual factors at play last month that contributed to weak manufacturing numbers.
“We suspect the latest bout of weakness mostly reflects temporary disruptions to factory output due to restrictions on polluting activities ahead of this week’s Victory Day parade in Beijing rather than a deterioration in underlying economic momentum,” he said in a research note, pointing out similar falls in PMI ahead of other major events in Beijing, including last year’s APEC summit and the 2008 Beijing Olympics.
Also Tuesday, the country’s central bank fixed the yuan 0.22 percent stronger — the currency’s biggest jump in almost a year — and injected another 150 billion yuan (or $23.43 billion at current exchange) into the financial system in the form of seven-day reverse repurchase agreements.
The People’s Bank of China routinely offers these short-term loans to commercial lenders, but the relatively large amount (not seen since February) indicates a concerted effort to stem capital outflows from an underperforming economy.
Despite a positive spin on the numbers from some quarters, many experts believe recent stock market falls, weak manufacturing data and currency devaluation are combining to make it difficult for China to meet its official growth target of 7 percent for the year.
“Given sluggish activities during the summer, GDP may fall below 6.5 percent in the third quarter,” economists at ANZ said in a research note.
“We believe further aggressive monetary easing and proactive fiscal policy, along with financial liberalization, are needed to maintain growth at around 7 percent.”