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21 Aug, 2015 10:28

Biggest slowdown in Chinese manufacturing in 6yrs

Biggest slowdown in Chinese manufacturing in 6yrs

China’s production activity is showing further signs of a slowdown, with its key indicator, the Purchasing Managers Index (PMI) at its lowest point since March 2009.

The outlook from Caixin and Markit, published on Friday, shows the index fell to 47.1 from 47.8 in July. The 50 mark separates expansion from contraction, and the last time the PMI was above 50 was February this year.

“The Caixin Flash China General Manufacturing PMI for August has fallen further from July’s two-year low, indicating that the economy is still in the process of bottoming out. But overall, the likelihood of a systemic risk remains under control and the structure of the economy is still improving,” Dr. He Fan, Chief Economist at Caixin Insight Group said in a statement.

READ MORE: China’s manufacturing index tumbles to 2-year low

Both output and new orders contracted at sharper rates this month. The gloomy data fuels fears of slowing growth in the world's second-largest economy. The statistics come more than a week after Beijing’s surprise devaluation of its national currency, aimed at reviving its faltering exports.

The government needs to decide on fiscal and monetary policies to ensure macroeconomic stability and speed up the structural reform, according to He Fan. This will “lead the market to confidence and renew the vigor of the economy,” he added.

READ MORE: China stages biggest currency devaluation in 20 yrs to revive exports

Concerns over an economic slowdown have triggered a massive stock sell-off. China's benchmark Shanghai Composite is off 32 percent over the past two months, dropping another 4.2 percent on Friday.

With the country’s real economy cooling, Beijing faces a difficult task reaching its stated aim of seven percent growth in 2015.

The Caixin China Report on General Manufacturing is based on about 90 percent of responses to surveys sent to more than 420 manufacturers. It is an overall measure of the health of China’s manufacturing sector.