China’s Manufacturing Sector Shows Improvement in October

The reading was also in line with data released last week which indicated that retail sales and investment are improving, despite the fact that economic growth in the three months July, August and September fell to 7.4 percent. The results released by HSBC are a preliminary report with the final index due on 1 November. The reading is based on a survey of 420 companies, of which between 85 and 90 percent responded.

Chief China economist at HSBC, Qu Hongbin, noted that growth had most likely bottomed out and will experience a gradual recovery into the fourth quarter. Qu went on to say that in order to secure a firmer growth recovery there would need to be a continuation of policy easing in the coming months. Among the challenges ahead are pressures in the job market, the ongoing financial turmoil in Europe and the trade disagreements between the United States and China.

Analysts have noted that the recovery of the Chinese economy is likely to be L-shaped, in that the decline may have stopped, but improvements in growth are likely to be very slow. This would be disappointing news for exporters to China that have been counting on the second largest economy in the world to play a major role in reviving global demand.

As China’s ruling Communist Party prepares to hand over power, an event that happens only once every ten years, it has set the economy’s official growth target for this year at 7.5 percent, which is far below the double-digit growth the country has experience in recent years.