Chinese Factory Gauge Slumps to Lowest Level Since March 2009

A private Chinese manufacturing gauge fell to the lowest in 6 1/2 years, underscoring challenges facing the economy as its old growth engines splutter.

A global sell off in riskier assets gained pace after the preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics dropped to 47.0 in September. That missed the median estimate of 47.5 in a Bloomberg survey and fell from the final reading of 47.3 in the previous month. Readings have remained below 50 since March, indicating contraction.

Premier Li Keqiang’s growth target of about 7 percent for this year is being challenged by a slowdown in manufacturing and exports even as services and consumption show resilience. President Xi Jinping downplayed concern about weakening growth in a speech in Seattle to mark the start of his U.S. trip, repeating a prior pledge that China can maintain medium to high growth.

Excess capacity “across a number of industries, as well as demand weakness, both domestically and externally, remain the major challenges faced by the manufacturing sectors,” Grace Ng, a greater China economist at JPMorgan Chase & Co. in Hong Kong, wrote in a report. She said the level of supplies of finished products, which rose to the second-highest level in the survey’s history, “points to further drag on industrial activity in the near term.”

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