China may yet be further from its goal of 7 percent economic growth this year—an early gauge of the country’s factory activity this month was the lowest it has been in nearly six and a half years.
The Caixin China Manufacturing Purchasing Managers’ Index (PMI), which measures nationwide manufacturing activity, fell to a 47.1 in August, a 77-month low and down further from July’s 47.8, Caixin Media Co. and research firm Markit said Friday.
A reading above 50 signifies that activity expanded and sub-50 indicates contraction.
Caixin Insight Group chief economist Dr. He Fan, said, “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.
The news comes just more than a week after China surprised the world by devaluing its yuan more than 4 percent over a series of days, a move that would help Chinese exporters as their cheaper goods might be more attractive to buyers. Analysts say, however, that the devaluation points to bigger concerns for the country’s slowing economic growth.
“There is still pressure on the front of maintaining growth rates, and to realize the goal set for this year the government needs to fine tune fiscal and monetary policies to ensure macroeconomic stability and speed up the structural reform,” Fan said. “This will lead the market to confidence and renew the vigor of the economy.”