Rate cuts fail to rouse China as manufacturing contracts again

Manufacturing sector shrank for a third successive month in October

China’s manufacturing sector shrank for a third successive month (Rex)

Hopes of a revival for China’s slowing economy were dashed after its manufacturing sector shrank for a third successive month in October, as a raft of stimulus measures failed to steer it back on course.

The official purchasing managers’ index (PMI) came in at 49.8 last month, the same as in September but behind economists’ forecasts of 50.0. A reading of 50 or above represents growth.

“While the PMI has stabilised, it is too early to confirm a bottoming out,” economists at ANZ Bank said.

There were also signs of a slowdown in China’s services sector – one of the few bright spots in its economy – which grew at its slowest rate in seven years.

Concerns over China’s economic growth played a big part in the global stock market downturn this summer and forced US Federal Reserve policymakers to delay a rise in interest rates for the world’s leading economy.

The prices of industrial metals such as copper and iron ore, a key component in steel-making, have also been hit by slowing growth in China as demand for raw materials cools in the world’s second- largest economy.

Investors called for action from Chinese policymakers after a year when the yuan was devalued and its stock market slumped.

However, even repeated cuts by the central bank to interest rates, which are now at record lows, and other measures have failed to stem the gradual slowdown.

Last week, analysts warned that it might take longer for the interest rate reductions to have an effect on China, where GDP slowed in the third quarter to a six-year low of 6.9 per cent – below its 7 per cent growth target for the year.