China faces a significant slowdown at the end of the year, official figures suggested yesterday (Sunday), raising new fears about a knock-on effect that could hit global commodity prices and damage British industry.
The country's manufacturing sector unexpectedly declined for the third consecutive month in October, while the services sector grew at the slowest pace since 2008's financial crisis.
The figures suggest that China could miss the rough 7pc growth target set by Beijing, with growth unlikely to improve upon the 6.9pc annual rate seen in the third quarter of the year without a substantial rebound.
The news comes as surveys show UK business chiefs see unstable currency and commodity prices and slowing growth in emerging markets as the biggest threats to British companies, with small businesses' export orders falling at their fastest rate for six years.
Almost one in three executives sees volatile currencies and commodities as the greatest danger to their businesses, according to EY's latest Capital Confidence Barometer, with 28pc saying a slowdown in emerging markets is the biggest threat.
Commodity prices, already near their lowest levels since 2001, could be hit today should investors read the latest Chinese data as a further indicator of slowing demand in the world's second-largest economy. The country's economic malaise has already rocked many of the world's biggest metals and oil producers, with commodities giants such as Glencore hoping to ride out the storm before a recovery.
But yesterday's PMI figures from China's National Bureau of Statistics gave little indication of an immediate turnaround. The manufacturing sector recorded a reading of 49.8, below the 50 mark that separates contraction from expansion, for the third month in a row. Markets had widely expected a rebound, with expectations set at 50.
Meanwhile, the services sector, which has helped make up for disappointing factory output in recent months, saw its slowest growth for seven years. The non-manufacturing PMI fell from 53.4 in September to 53.1.
The country's central bank has repeatedly cut bank lending requirements in an attempt to boost growth and ward off deflation, but economists suggested the new figures could herald further measures.
"As deflation risks intensify, a further RRR cut [the reserves a bank must hold against lending] before the end of this year is still possible," said economists at ANZ Bank.
Small UK exporters are already suffering from slowing demand, according to a CBI survey today. Of the 434 manufacturers surveyed, 46pc said export orders had fallen in the three months to October, against 10pc reporting a rise. The net balance of -35pc is the worst recorded since April 2009.