Manufacturing activity in China contracted for the third straight month in December. This comes from an official survey of factory owners struggling with weak demand. The official Purchasing Managers’ Index (PMI) fell to 49.0 in December from 49.4 the previous month, the National Statistics Authority said. This means that the barometer once again remained below the growth threshold, which is 50. It was also weaker than analysts expected.
“We need to strengthen policy support, otherwise the trend of weak growth will continue,” said Nie Wen, an economist at Hwabao Trust. Never expected the central bank to cut interest rates and banks’ reserve ratios in the coming weeks. “The fall in prices has severely affected companies’ profits and further deteriorated employment and people’s incomes. We could be witnessing a vicious circle.”
The People’s Republic is struggling with an ongoing real estate crisis, and the slowdown in global growth poses additional challenges for the government in Beijing. Five of China’s largest state-owned banks cut interest rates on certain deposits on December 22, the third round of rate cuts this year. China’s central bank said on Thursday it would make more policy adjustments to support the economy and encourage a recovery in prices. Earlier this month, Chinese leaders announced further steps to support the economy next year. The government has taken a number of measures in recent months to support the post-pandemic recovery.
The official non-manufacturing purchasing managers’ index (PMI), which also includes services and construction, rose to 50.4 from 50.2 in November. China’s economic growth is expected to reach the official target of around five percent this year.