Key surveys of Chinese factory activity show contraction

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An important indicator of China’s manufacturing sector fell in September to its lowest level in six and a half years.

The purchasing managers index (PMI) released Thursday by Caixin Insight Group showed a reading of 47.2 in September, down from August’s 47.3.

A figure above 50 generally means a positive outlook as measured by managers’ purchasing intentions, while below 50 is taken as a negative reading.

“Tepid demand is a main factor behind the oversupply of manufacturing and why it has not recovered,” said He Fan, chief
economist at Caixin Insight Group.

In contrast, China’s official figures also released Thursday showed a PMI reading of 49.8 in September, up marginally from 49.7 for August after two months of decline in a row. However, this also showed a contraction.

Both the Caixin and official PMI use the same 100-point scale.

The surveys are seen as economic indicators, and tend to affect currency markets.

China’s financial markets were closed Thursday for the start of a week-long public holiday.

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