Beijing Jan. 30 (BNA): Growth in factory activity in China slowed in January with the resurgence of COVID-19 cases and strict lockdowns affecting production and demand, but the slight expansion showed some signs of resilience as the world’s second largest economy entered. It will likely be a bumpy new year.
Data from the National Bureau of Statistics showed on Sunday that the official manufacturing PMI hit 50.1 in January, remaining above the 50-point mark that separates growth from contraction, but slowed from 50.3 in December. .
Analysts had expected the PMI to fall to 50.
The official results contrasted with those found in a private survey of small manufacturers mostly in coastal areas, which showed activity declining at the fastest rate in 23 months.
China’s economy started strong last year, rebounding from a severe recession caused by the epidemic, but began to lose momentum in the summer, weighed down by debt problems in the property market and strict anti-virus measures that have hurt consumer confidence and spending.
Rising raw material costs and weak demand have also eroded corporate profit margins. Industrial earnings rose at their slowest pace in December in more than a year and a half.
With the real estate stagnation expected to persist through at least the first half of this year and the emergence of more contagious variables for COVID-19, China’s central bank has begun cutting interest rates and injecting more liquidity into the financial system to lower borrowing costs. More modest easing steps are expected in the coming weeks.
Stability will trump everything ahead of this year’s five-year Communist Party congress, as policymakers look to avoid a sharper slowdown that could undermine job creation.
But such easing carries risks, as other global central banks such as the US Federal Reserve prepare to raise interest rates, which could stimulate capital outflows from emerging markets such as China.
The International Monetary Fund on Wednesday cut its growth forecast for China for 2022 to 4.8%, from 5.6% previously, reflecting real estate problems and consumption impact from severe COVID-19 restrictions.
“Manufacturing activity has slowed due to weak domestic demand,” said Zhang Chuiwei, chief economist at Pinpoint Asset Management. The service sector has also been negatively affected by the outbreak of the disease in many cities.
“The weak PMI indicates that the easing measures from the government have not yet passed to the real economy…We expect the government to step up policy support in the coming months, particularly through more fiscal spending.”
The sub-index in the official production PMI settled at 50.9, down from 51.4 in December, while new orders fell to 49.3 from 49.7.
While new COVID-19 cases in China have been low compared to many other countries, the wave of infections since late December in the Xian manufacturing hub has forced many auto and chip manufacturers to shut down operations. Production has gradually returned to normal as the city emerges from lockdown.
Samsung Electronics Co Ltd last month temporarily adjusted operations at its Xian manufacturing facility for NAND flash memory chips, but on Wednesday said production is back to normal.
Production in Tianjin, which battled an outbreak of a highly transmissible omicron variant, was also affected.
Meanwhile, the government is trying to reduce levels of industrial air pollution ahead of the Beijing Winter Olympics, which begin on Friday. China asked steel mills in northern regions to cut production until mid-March.
A survey of China’s sprawling service sector showed growth slowed in January, as virus containment measures weighed on consumer sentiment.
China’s official composite PMI, which combines manufacturing and services, settled at 50.1 in January compared to 52.2 in December.
China’s economy grew 4.0% in the fourth quarter of the previous year, its weakest expansion in a year and a half.
MI