SHANGHAI (BLOOMBERG) - China's manufacturing conditions slipped to the weakest level in more than three years as sluggishness in the country's old growth drivers adds to risks facing the government's growth target.
The official purchasing managers index fell to 49.6 in November, the National Bureau of Statistics said on Tuesday (Dec 1) - the weakest level since August 2012. That compared with a median estimate of 49.8 in a Bloomberg survey of economists, which was also the level for September and October.
The non-manufacturing PMI rose to 53.6 from 53.1 a month earlier. Numbers below 50 indicate deterioration.
Six central bank interest rate cuts in a year have not been enough to spur a recovery in manufacturing as a property downturn and industrial overcapacity weigh on the sector.
Premier Li Keqiang's goal of about 7 per cent expansion for 2015 is at risk, even as employment has held up thanks to resilience in services industries.
"China's manufacturing sector remains sluggish due to the property slowdown," said Mr Zhou Hao, a Singapore-based economist at Commerzbank AG.
"While property prices are turning around led by first-tier cities, housing investment continues to moderate, reflecting a significant property inventory overhang."
The Shanghai Composite Index was 0.2 per cent lower at 9.35am local time. The onshore yuan, which won approval on Monday for addition to the IMF's list of reserve currencies, was little changed after the data.
Readings of output, new orders, inventories and employment all weakened from October, the manufacturing PMI report showed.
A range of private indicators for November had suggested conditions remained weak for China's industrial sector.
A privately compiled PMI and a gauge based on search engine interest in small- and medium-sized businesses deteriorated last month, while a sentiment indicator dropped sharply from October. A PMI reading for the steel industry slumped to 37 in November.
"The steel sector in China continues to come under overcapacity pressures as well as declining demand on the back of slumping property investment," according to a recent report by Dr Liu Li Gang, head of China economics at Australia & New Zealand Banking Group in Hong Kong.
To combat the downturn, the People's Bank of China has cut benchmark borrowing costs to a record low and is adding funds to the banking system as it moves to a new monetary framework.
"Substantial policy support has yet to make the economy any better, though it has at least stopped it from getting worse," Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a note.
"Policy will remain supportive, including further rate cuts in 2016 and amped up fiscal spending. Accelerated easing is not yet called for."