The world's second largest economy faces its fastest decline in factory activities in a year as new orders stagnated in April. Further measures are now needed to pick up the stumbling economy.
April’s results showed the worst operating conditions for the manufacturing sector in a year. For the first time since the global crisis, the second quarter economic growth reports are expected to decline by 7 percent. According to analysts, this may result in job losses and the emergence of a debt default for local companies.
China’s official PMI for April was at 50.1, which was above expectations. However, the HSBC/Markit Purchasing Managers' Index (PMI) fell to 48.9 as domestic and export demand remained fragile. While PMI levels showing below 50 are identified as production performance, below that level is seen as a slowdown in output.
Additionally, input costs and selling prices both fell this month. Moreover, weak demand and employment in the manufacturing sector continued to decline. China is also facing difficulties picking up its property market, slowing investments and domestic debt.
Additional results showing the performance of the Chinese economy for April will be released over the next few weeks. Trade is the first data expected to be released on Friday.
According to recent results, it is evident that a further stimulus is required in order to prevent the economy from losing its 7 percent annual growth rate seen in Q1.
The Politburo, China’s top decision making body, announced on Thursday that officials will be pushing for further tax cuts and policy adjustments will be made.
Stimulus plans from Beijing, sparked the Chinese shares causing them to close higher as hope increased for investors. The Shanghai CSI 300 index increased to 0.9 percent.