By By Leika Kihara
TOKYO (Reuters) – Asia’s manufacturing activity stagnated in October as a rebound in China failed to give much of a boost to regional factories, private surveys showed, a discouraging sign for policymakers bracing for a potential escalation of U.S.-China trade tensions.
The readings come as the International Monetary Fund (IMF) warned of rising risks to Asia’s economic outlook from trade fragmentation, China’s property sector woes and the potential for further market turbulence.
Factory activity shrank in Japan and South Korea due to weak domestic demand and slowing growth in U.S., European and Chinese markets, the purchasing managers’ index (PMI) surveys showed on Friday.
In a glimmer of hope, however, China’s manufacturing activity swung back to growth in October, helped by a slew of stimulus measures rolled out by Beijing to prop up a fragile economy.
The Caixin/S&P Global manufacturing PMI rose to 50.3 in October from 49.3 the previous month, a private survey showed, beating analysts’ forecasts in a Reuters poll of 49.7.
The reading echoed an official survey on Thursday, which showed China’s manufacturing activity expanded for the first time since April in a sign the economy was stabilising.
But Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, warned that risks of deflation were rising in China and required further steps to fix its property sector troubles and boost consumption.
“China has a huge bearing on what happens in Asia,” he told Reuters on Friday. “When China slows, the rest of Asia slows,” he said, adding that the country must “move away from an investment and export-led model, to a consumption-led model.”
Japan’s final au Jibun Bank manufacturing PMI fell to 49.2 in October from 49.7 in September, shrinking at the fastest pace in three months due to weak domestic and overseas demand.
The index remained below the 50.0 threshold that separates growth from contraction for the fourth straight month.
South Korea’s PMI stood at 48.3 in October, unchanged from the previous month and shrinking for a second straight month with output falling by the most in 16 months, a private survey showed.
Factory activity in October also shrank in Indonesia and Malaysia, but expanded in Taiwan and Vietnam, the surveys showed.