China manufacturing contracts
Aliminium ingots at a factory in Wuxi.

China's manufacturing activity contracted for a second straight month in September, according to official data released today which fell short of expectations for an expansion.

The government's purchasing managers' index (PMI) stood at 49.8 in September, a modest improvement on 49.2 in August, according to the China Federation of Logistics and Purchasing and the National Bureau of Statistics.

A PMI reading above 50 indicates expansion, while one below that mark points to contraction. The result came in below the median forecast of 50.2 in a survey of 11 economists by Dow Jones Newswires.

The official PMI came on the heels of a closely watched survey of China's manufacturing that also showed the sector still in contraction, but slightly improved from the month before.

The final reading of the purchasing mangers' index released by British banking giant HSBC for September was 47.9, up from 47.6 in August, HSBC said Saturday.

Despite the improved outcome in both surveys, China's manufacturing sector continues to struggle as the country's once red-hot economy negotiates a slump that began last year.

Global woes surrounding Europe's debt crisis, and a weak US economy still suffering from lacklustre growth amid high unemployment, have been a drag on China's export sector.

Both Europe and the United States are key Chinese trading partners.

China's economic growth slowed to 7.6 percent in the three months to June, for the poorest result in three years since the height of the global financial crisis.

Various data so far in the current third quarter, which ended Sunday, has been broadly disappointing, fostering expectations economic growth may have slowed further during the period.

Gross domestic product figures for the three months through September are scheduled to be released in mid-October.

Chinese authorities have expressed confidence they will achieve their 2012 economic growth target of 7.5 per cent for 2012, though that would mark a sharp slowdown from 9.3 percent hit last year and 2010's 10.4 per cent.

They have taken steps this year to bolster the economy with two interest rate cuts in quick succession, and by easing restrictions on how much money banks must keep on hand in an effort to boost lending and growth.

So far, the measures have had little impact. Analysts have been divided over prospects for more stimulus given fears that too much could prove harmful over the long term.

Political uncertainty ahead of a once-a-decade leadership change set to start taking place at a key Communist Party congress set for November has also been blamed for distracting officials from economic matters.

The West Australian

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