3rd LD Writethru-China Focus: China's manufacturing PMI holds steady in October

China's factory activity held steady in October as the country's manufacturing sector saw improved but still weak demand, official data showed Sunday.

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

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

The production sub-index posted at 52.2 in October, slightly down from 52.3 in September, but up from 51.7 in August, showing recovered growth in production.

The sub-index for new orders came at 50.3, still in expansion territory and up from 50.2 in September, indicating demand has improved.

The sub-index for employers stood at 47.8 in October, 0.1 percentage point lower than September, implying that the manufacturing sector provided fewer jobs than before.

The inventory sub-index for raw materials and the sub-index for suppliers' delivery time dropped 0.3 percentage points and 0.2 percentage points from September to 47.2 and 50.6, showing accelerating pace of raw material consumption.

Chen Zhongtao, analyst with the China Logistics Information Center, said the overall index indicated that economic growth was stabilizing following government intervention to inject liquidity and facilitate trade.

"The economy will be better off buoyed by more infrastructure investment and the foreseeable consumption [that will occur] along with the coming festivals," said Chen.

The sub-index for large enterprises edged down 0.1 percentage points to 51, while sub-indexes for small-and medium-sized enterprises (SMEs) remained under 50.

"Financing difficulties are still a major issue for SMEs," said Chen.

The PMI figures show that pro-growth policies are taking effect, resulting in signs of stabilizing for China's economy and making a further slump unlikely, Zhang Liqun, researcher at the Development Research Center of the State Council, a government think tank, said.

In October, China's non-manufacturing activity contracted as business growth in the wholesale sector and capital market slowed due to the week-long National Day holiday from Oct. 1, official data showed Sunday.

The PMI for the non-manufacturing sector stayed at 53.1 in October, 0.3 percentage points down from September.

Accommodation, retail, logistics, tourism and transport posted fast growth this month driven by increased spending over the National Day holiday.

"Tourism and home-buying have became a key pillar to prop up China's steady and effective growth," said Cai Jin, deputy head of China Federation of Logistics & Purchasing.

Cai suggested more attentions should be given to reforms of the income distribution and social welfare systems to promote consumption-led growth. Endi