World Economy

Disappointing Results for China

Disappointing Results for ChinaDisappointing Results for China

China has been hit by a series of disappointing economic results with factory activity contracting the most in two years. New orders fell dashing hopes that the world’s second-largest economy may be steadying.

A private survey–the Caixin/Markit China Manufacturing Purchasing Managers’ Index–the PMI–dropped to 47.8 in July. That’s the lowest in two years and down from 49.4 in June, Euronews reported.

The results which focus on small to mid-sized companies come on the back of the official survey at the weekend with the PMI index falling to 50.

Growth, which reached a peak in early 2014 has seen a slow decline flat-lining from March. New orders contracted while factory output shrank for the third consecutive month.

The deteriorating conditions forced companies to cut staffing for the 21st straight month and factories had to reduce selling prices to a six-month low due to increasing competition.

The central bank has already cut interest rates four times since November and repeatedly eased lending rates for banks in aggressive measures to spur spending.

After months of monetary easing, China’s economy is still growing at its slowest pace in 25 years with little sign of an immediate turnaround, Bloomberg reported.

That spells more stimulus from policy makers, and unlike many of its peers, China holds significant firepower that it could unleash to boost the world’s second-largest economy.

The central bank has room to cut interest rates further and has an ever-expanding tool kit to stoke demand. The country’s $3.69 trillion of foreign-exchange reserves and relatively low national government debt levels mean it has the ammunition for fiscal stimulus.