Manufacturing activity in China and other Asian economies remained weak in October, surveys showed today, as US and European economic woes hit demand for clothes, shoes and electronic gadgets.
China is heavily reliant on exports to drive its economy - the second largest in the world - and the downturn in key US and European markets is already hurting manufacturers who employ millions of workers.
The official purchasing managers' index (PMI) - based on a survey of 820 manufacturers - dropped to 50.4 in October from 51.2 in September, the China Federation of Logistics and Purchasing said in a statement.
HSBC also said its survey of over 430 purchasing managers showed activity expanded slightly, with its index hitting 51 in October compared with 49.9 in September and the first time it has gone above 50 since June. A reading above 50 indicates the sector is expanding, while a reading below 50 suggests a contraction.
But analysts said the government's broader PMI survey was a more accurate reflection of the country's manufacturing sector, which they expect to deteriorate in the coming months.
Adding to pressure on manufacturers is Beijing's tightening monetary policy as it tries to bring down inflation as prices sit near three-year highs above 6%.
As well as increasing interest rates five times since October last year, leaders have also ramped up the amount of money banks must hold in reserve, effectively restricting the amount they can lend, in turn weighing on economic growth.
An official index measuring new export orders fell to 48.6 in October from 50.9 in September while the input price index, a gauge of raw material costs, plunged to 46.2 from 56.6, the federation said.
China's economic growth eased to 9.1% in the third quarter from 9.5% in the second quarter as government efforts to tame inflation, as well as economic turbulence in Europe and the US, curbed activity.
Chinese Premier Wen Jiabao indicated last week that the government might relax tight credit restrictions as small exporters struggle to pay their bills and falling property sales threaten to drive debt-laden developers to the wall.
