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Investors worry the sun might be setting on Chinas boon

Yatheendradas C.k. at 11:56 AM - Aug 21, 2015 ( ) Views: 368


China factory activity falls to weakest in over six years


Factory activity in the world's second largest economy, China, shrank at its fastest pace in more than six years in August.

The private Caixin/Markit manufacturing purchasing managers' index (PMI) dropped to 47.1 from 47.8 in July.

A figure below 50 shows contraction in the sector and one above means growth.

As domestic and export demand dwindle, Friday's data will likely add to global worries that the Chinese economy is set for a continued slowdown.

Friday's reading was the lowest since March 2009, in the depths of the global financial crisis, and the sixth consecutive one below the 50-point level.

The Caixin flash PMI is the earliest economic measure of the Chinese economy to be released each month and is closely watched for clues on how growth is faring.

Catching a cold

Nicholas Teo, market analyst with CMC markets warned in a note that China's slumping economy could dash hopes for a global recovery.

"China today is no longer just the 'factory' of the world. It is an important consumer of the world's products and services. Many companies and industries depend on the Chinese consumers who are now 'disadvantaged' in purchasing power," he said.

"So when it sneezes', many around the globe may just catch a cold!"

Beijing has struggled to stabilise the country's stock markets after sharp losses in early summer.

In August, the central bank stunned global markets by taking steps to devalue the country's currency, the yuan, and allowing it more freedom to fluctuate in line with market developments.

The move was widely seen as an attempt to prop up the country's ailing export sector, making Chinese goods cheaper abroad

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