China's manufacturing gauge stabilises near 3-year low as stimulus measures gain traction

Employees working at a production line of electronic panels in a factory in China.
Employees working at a production line of electronic panels in a factory in China. PHOTO: REUTERS

BEIJING (BLOOMBERG) - China's official factory gauge stabilised around a three-year low as government stimulus measures showed signs of helping to steady a slump in manufacturing.

The official purchasing managers index climbed to 49.8 in September, the National Bureau of Statistics said Thursday (Oct 1), compared with the median estimate of 49.7 in a Bloomberg survey, which was also the level in August. Readings below 50 indicate contraction.

The report signals that five central bank interest rate cuts since November and the government unleashing new rounds of infrastructure spending are gaining traction, helping to cushion the world's second-largest economy. Still, excess capacity and factory-gate deflation are pressuring China's manufacturers, adding headwinds for the government's 2015 growth objective of about 7 per cent.

"China's economic transformation may take a longer time than previous estimates," said Mr Li Wei, the China and Asia economist for Commonwealth Bank of Australia in Sydney. Downward pressure remains, he added.

The non-manufacturing PMI reading for September was unchanged at 53.4, reflecting the relatively stronger performance of services industries throughout the economic slowdown. New export orders for services jumped to 51.1 from 46.6.

The Australian dollar, seen as a proxy for China due to its raw material exports, strengthened after the report, while the offshore yuan was little changed. Stock markets in China and Hong Kong are closed on Thursday for the National Day holiday.