You will be redirected back to your article in seconds
Skip to main content

China’s Factory Activity Remains Flat as Five-Year Plan Details Emerge

China

China’s economic slowdown looks set to last as it continues to shift its growth towards service industries and higher-end production.

The country’s manufacturing purchasing managers index (PMI) experienced its third consecutive month below the 50 mark in October, according to data released Sunday by the China Federation of Logistics and Purchasing and the National Bureau of Statistics.

At 49.8, the reading showed that factory activity shrunk last month, which followed the recent news that China’s economy grew 6.9% in the third quarter—its weakest rate since 2009. And it looks like officials aren’t expecting that figure to climb above 7 percent anytime soon.

China’s Premier Li Keqiang last week declared annual economic expansion of at least 6.5% through 2020, as the government outlined its next five-year plan for national economic and social development at a Communist Party meeting, the full details of which won’t be revealed until it is endorsed by the country’s parliament in March 2016.

“We have capacity to keep annual economic growth at above 6.5% and meet the targets of creating a ‘moderately prosperous society’ by 2020,” he said during a speech in Seoul, according to the state-run Xinhua News Agency.

The 10 key points of the plan, the 13th of its kind, include “maintaining economic growth, transforming patterns of economic development, optimizing the industrial structure, promoting innovation-driven development, accelerating agricultural modernization, reforming institutional mechanisms, promoting coordinated development, strengthening ecological construction, safeguarding and improving people’s livelihoods and promoting pro-poor development.”

But economists and investors are cautious.

“It remains to be seen whether China will suffer a destabilizing ‘hard landing’ during 2016 to 2020, undergo stagnation or a protracted period of lower growth or see a reinvigoration of the economy and rebound in growth after meaningful reforms,” Barclays told CNBC.

Deutsche Bank commented, “If the growth target is set at 6.5%, it means the government will tolerate slower growth to allow more space for structural adjustments. In this case, we expect there will be less stimulus efforts by the government… If the target is set at 7 percent, we believe the government will have to maintain its loose policy stance and do more easing.”