BEIJING — China’s manufacturing activity slumped in August to a nine-month low, offi­cial figures showed yesterday, in the latest sign of serious weakness in the world’s sec­ond-largest economy.
The government’s purchasing managers’ index (PMI) fell to 49,2 in August from 50,1 in July, according to a statement released by the China Federation of Logistics and Pur­chasing and the National Bureau of Statistics.

A PMI reading above 50 indicates expan­sion, while one below 50 points to contrac­tion.
The reading was the lowest since 49 in November last year, and below the median forecast of 50 in a survey of 11 economists by Dow Jones Newswires.
“Not only did the August PMI continue to decrease, but the scope of the decline got big­ger and fell below 50 percent,” Zhang Liqun, an analyst with the State Council’s Develop­ment Research Centre, was quoted as saying in the statement.

Zhang added that the latest result “reflects the manufacturing industry is in a state of contraction”.
China’s economy weakened to an expan­sion of 7,6 percent in the second quarter up until the end of June, the worst performance in three years and marking the sixth straight quarter of slower growth.
In the current third quarter, July figures for trade, industrial output and retail sales came in weak, raising concerns that government efforts to stimulate growth may be insuffi­cient.

China’s economy is also suffering from declining investment from abroad. Foreign direct investment fell 8,7 percent in July, the worst decline since December. For the first seven months of 2012, FDI fell 3,6 percent on year.

Authorities have tried to boost the econ­omy with interest rate cuts and by lowering the amount of reserves that banks must keep on hand in a bid to spur the kind of lending that could stimulate a rebound.
“China’s manufacturing sector continues to struggle, weighed down by a significant domestic slowdown, a wholly unsupportive external climate and a completely insufficient policy response,” IHS Global Insight econo­mists Ren Xianfang and Alistair Thornton said in a report reacting to the PMI data.

They added that the economy is facing var­ious stresses, including the eurozone crisis, capital outflows and lack of demand for bor­rowing.
Policy caution amid fears of going over­board on stimulus measures as well as the distraction of a pending once-a-decade makeover in the country’s leadership are fac­tors as well.
“Minds are not solely focused on the econ­omy,” they wrote of the coming leadership change.

The official PMI figures came just over a week after British banking giant HSBC’s closely watched purchasing managers’ index hit a preliminary reading of 47,8  for August, also the lowest since November in that sur­vey.

HSBC is scheduled to release its final PMI figure for August tomorrow.
Analysts say the divergence in the official and private PMI surveys is caused by  HSBC giving more weight to small firms, which have suffered more than state-owned giants in the current economic downturn. — AFP.