GROWTH at China’s big manufacturing companies unexpectedly stalled in July as demand at home and abroad weakened, an official survey showed Saturday, reinforcing views that the economy needs more stimulus as it faces fresh risks from a stock market slump.

    The official Purchasing Managers’ Index (PMI) stood at 50.0 in July, compared to the previous month’s 50.2. The 50-point mark separates growth from contraction on a monthly basis.

    Analysts polled by Reuters had predicted another tepid reading of 50.2, pointing to expansion, albeit a sluggish one.

    However, both export and domestic orders shrank for the large firms covered by the survey, and in response they continued to cut jobs.

    It did not mention any impact from a savage 30 percent drop in stock markets since mid-June, though analysts said wild price swings could hit consumer and business confidence and investment decisions, adding pressure on the already cooling economy.

    “It warrants more concrete policy measures to stabilize the real economy. Perhaps the funds used to prop up the share market could be used to support the real economy,” ANZ economists Liu Ligang and Louis Lam said in a research note.

    ANZ maintained its forecast that the central bank will cut interest rates by another 25 basis points (bps) this quarter and reduce banks’ reserve requirements by 50 bps by year-end.

    The government has rolled out a flurry of steps since last year to try to put a floor beneath sputtering economic growth, including accelerating infrastructure spending and repeated reductions in interest rates and banks’ reserve ratio. But growth is still expected to moderate this year to around 7 percent, the slowest in a quarter of a century.

    The statistics bureau said the weaker reading was partly due to the weather, as hot temperatures and heavy rain led some firms to reduce production and carry out maintenance. “The recent fall in prices of oil and other commodity products also affected related industries,” it added.

    A preliminary, private Caixin/Markit survey last month showed activity at smaller factories contracted by the most in 15 months.

    Economists at Nomura said last week that China was “far from being in a crisis scenario,” and believe the share sell-off “should only have a limited negative impact on the real economy.”

    A similar activity survey Saturday suggested strength in the services sector continued to offset some of the persistent weakness at factories, but there were worrying signs on that front, too.

    The official non-manufacturing PMI edged up to 53.9 in July, compared with the previous month’s reading of 53.8 and pointing to solid expansion.(SD-Agencies)

    Nation ‘needs to ensure economic risks don’t trigger unrest’

    CHINA needs to ensure that risks presented by a slowing economy do not trigger unrest, the State planner said Friday, acknowledging the problems the country faces should unemployment rise.

    Keeping unemployment low is a top policy priority for the government, a task that it has admitted will become more difficult as growth grinds towards a 25-year low this year.

    The government should “further improve the social security system ... to ensure economic risks do not morph into social risks,” the National Development and Reform Commission said in an online statement without mentioning unemployment.

    China has no reliable official measure of joblessness, which has hovered around 4 percent in cities for 12 consecutive years.

    But all official accounts suggest that the labor market has held up well and there is no anecdotal evidence of a rise in protests or unrest.

    That said, the Ministry of Human Resources and Social Security warned earlier last month that it sees “structural” challenges in the labor market in the second half of the year.

    Some provinces, such as the northeastern rust belt, have been hit by job losses due to their reliance on polluting businesses such as steel making and mining, which are being scaled back.

    Industries such as steel and cement production have also shrunk due to supply gluts.

    The transformation of large State-owned firms, resource-rich regions and old industrial towns would be stepped up to help them move up the value chain, the commission said.

    (SD-Agencies)