China’s Manufacturing Purchasing Managers’ Index (PMI) for the month of August has fallen to a nine month low with an index of only 47.8 on a total 100 point scale. The scale was 49.3 for the month of July. The fall in PMI has triggered the demand for easing or stimulus in the economy to boost the industrial index. Due to decline in the volume of international demand and reduced shipments, the industry is facing PMI of below 50%, which can be considered as contraction in the sector.

Economists from China and other core nations believe that fresh stimulus is indispensable to support an era of new industrialization to enhance the economic growth. At this time, when global orders or exports are decreasing at increasing rate, the economy is in desperate need of some stimulus by the end of 10^th month of this year.

Considering current situation, the central bank of China is ready for further easing whether in the form of open market operations, bank rate operations (cut in interest rate) or even cut in required reserve ratio (RRR) for financial institutions.

With the release of weak manufacturing data, the immediate need of stimulus just hovers over the central bank of China. After much hyped execution of economic stimulus from the ‘lender of last resort’, the Chinese economy is believed to gain momentum in its economic activities creating more investment opportunities in industrial sector, increased production followed by rise in level of income, consumption and saving. Market analyst forecast the expected stimulus to deliver ‘Multiplier-effect’ to the economy via capital accumulation/formation, ultimately fostering Chinese PMI in the long run.