Chinese factory surveys show the economy is weakening as Beijing steps up support

China’s economy has weakened further in recent weeks, surveys released Monday showed, signaling a need for support as the government accelerates stimulus.

The Caixin Purchasing Managers’ Survey showed new manufacturing orders fell at the fastest pace in two years in September.

An official measure published by the Office for National Statistics showed a less drastic fall, but marked the fifth straight month of contraction. The PMI was at 49.8 in September, up from a six-month low of 49.1 in August. The index is on a scale where numbers above 50 indicate expansion.

The survey showed that factory output increased while new orders fell.

China’s stock markets rose on Monday, reflecting enthusiasm for a wave of policy measures announced last week, including lower interest rates and lower down payment requirements for mortgage loans and a cut in bank reserve requirements.

The main smaller Shenzhen index rose 8.2%, while the Shanghai Composite rose 5.7%

“The stimulus package announced last week should help onshore activity in the coming months,” Gabriel Ng of Capital Economics said in a report. But he noted that imbalances between oversupply of many products and weak demand persist. And trade measures against China, such as higher tariffs on electric vehicles and other goods, will also hurt the economy.

“In this environment, a significant cyclical recovery would require considerable fiscal stimulus,” he said. “There has been no official announcement of fiscal support yet, although some media reports suggest one could be coming soon.”

Over the weekend, Beijing followed through on measures announced last week to support the real estate industry and revive emerging financial markets. The central bank announced on Sunday that it will order banks to cut mortgage rates on existing home loans by October 31. Meanwhile, the main southern city of Guangzhou lifted all restrictions on home purchases over the weekend, while both Shanghai and Shenzhen unveiled plans to relax. key purchase boards.

Property developers have struggled after the government clamped down on excessive lending for projects a few years ago. House prices have continued to fall and the government has taken steps to ensure developers deliver apartments that have been paid for but not yet built.

The slump in the housing sector has hit the world’s second-largest economy, hitting many other industries that depended on booming home construction, such as appliance makers and building materials makers.

The economy expanded at a 4.7% pace in the last quarter, slightly below the government’s target of around 5%.