China's manufacturing continues to be weak

Manufacturing of consumer goods, like food and liquor continued to improve in September.

China's factory activity showed slight increase in September but remained in contraction for a second month as the manufacturing sector of the world's second largest economy continued to be weak due to anaemic demand and slowdown of the economy, official data said on Thursday.

China's manufacturing purchasing managers' index (PMI) came in at 49.8 in September, up from 49.7 for August, according to data released by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP).

A reading above 50 indicates expansion, while that below 50 represents contraction.

The index fell into contraction territory for the fourth time this year, but the slight increase in September was a reversal from two months of decline in a row previously, state-run Xinhua news agency reported.

Anaemic demand and downward pressure persisted in the manufacturing industry, but there was a recovery in production and market demand, said NBS statistician Zhao Qinghe.

The production sub-index posted 52.3 in September, up from 51.7 in August, showing accelerated growth in production.

The sub-index for new orders came at 50.2, back to expansion territory and up from 49.7 in August, indicating demand has improved slightly.

"The figures showed that pro-growth policies are taking effect, pointing to signs of stabilising for China's economy," Zhang Liqun, researcher at the Development Research Centre of the State Council, a government think tank said.

Chen Zhongtao, analyst with the China Logistics Information Center, observed that manufacturing firms accelerated in reducing their stock of goods in September.

Manufacturing of consumer goods, like food and liquor continued to improve in September.

Zhao said that was partly due to strong demand ahead of the Mid-Autumn Festival and the National Day holiday, which fall near the end of September and at the start of October.

The Caixin General China Manufacturing Purchasing Managers' Index (PMI) was 47.2 in September, down from a final reading of 47.3 in August but slightly higher than an earlier flash reading of 47 for September, according to a survey by financial information service provider Markit and sponsored by Caixin Media Co.Ltd.

He Fan, chief economist at Caixin Insight Group, said the manufacturing industry had reached a crucial stage in structural transformation, noting that tepid demand was a main factor behind the weakness.

"The industry was still weak, but the downward movement has slowed somewhat," he said.

Manufacturing is a key driver of China's growth. The country's GDP expanded 7 per cent year on year in the first half, in line with the official growth target but still the lowest reading since the second quarter of 2009.