Growth in China’s services sector slowed to its lowest level in seven years, while the country’s manufacturing sector continued to contract in October, according to official Purchasing Managers’ Index (PMI) data released Saturday by China’s National Bureau of Statistics.
The services sector, which accounts for a major part of China's economic output, has also been the fastest growing sector in the country. In 2014, for instance, it accounted for 48.2 percent of China’s GDP, compared with the 42.6 percent contribution from manufacturing and construction.
The third straight month of contraction in the country’s manufacturing sector comes despite the introduction of a raft of stimulus measures to boost the country’s flagging growth. The official non-manufacturing PMI unexpectedly fell to 53.1 in October from the previous month’s reading of 53.4. The manufacturing PMI also failed to meet analysts’ expectations of 50.0, and stood at 49.8 -- the same level as last month. A figure below 50 indicates that factory activity contracted.
“Because of the recent weak recovery in the global economy and continuing downward pressure in the domestic economy, manufacturers are still facing a severe import and export situation,” Zhao Qinghe, a senior statistician at China's National Bureau of Statistics in a statement. “Financing is difficult, and expensive financing remains one of the main problems plaguing the production and operation of small businesses.”
China, which recently reported a tepid 6.9 percent GDP growth in the third quarter, is currently reeling from the effects of a slowdown that has forced the country’s central bank to cut interest rates five times this year and lower the amount of cash that banks must hold as reserves. However, the measures have so far failed to boost sluggish demand at home and abroad.
“As deflation risks intensify, a further RRR [Reserve Ratio Requirement] cut before end of this year is still possible,” economists at ANZ Bank reportedly said.