China’s factory activity sputtered in December, underlining the challenges facing the country’s manufacturers as they fight rising costs and softening demand in a cooling economy.
After a rough 2014, the world’s second largest economy looks set to start the new year on a weak note, reinforcing expectations that Beijing will roll out more stimulus to avert a sharper slowdown which could trigger job losses and debt defaults, Reuters reported.
China’s official Purchasing Managers’ Index (PMI) slipped to 50.1 in December from 50.3 in the previous month, the National Bureau of Statistics said on Thursday, its lowest level of the year and clinging just above the 50-point level that separates growth from contraction on a monthly basis.
Analysts polled by Reuters had forecast a reading of 50.1.
“This indicates that industrial growth is still in a downward trend, but the pace [of declines] is slowing,” Zhang Liqun, an economist at the Development Research Center, said in a statement accompanying the report.
“The current economic situation is in the process of returning to stability from slowing down,” Zhang said.
A similar private survey released on Wednesday, the HSBC/Markit Manufacturing PMI, showed activity shrank for the first time in seven months in December. That survey focuses on smaller companies, which are facing greater strains, notably higher financing costs and problems getting loans.
The official survey looks more at larger, state-owned firms, which have been more resilient to the protracted downturn, partly due to generous government subsidies and better access to credit, the news agency said.
Many analysts expect economic growth in the fourth quarter to slow only marginally from 7.3 percent in the third quarter, though a raft of weak data suggest that may be too optimistic.
That means full-year growth will undershoot the government’s 7.5 percent target and mark the weakest expansion in 24 years.
Many economists still expect more interest rate cuts as well as reductions in banks’ required reserve ratios this year, perhaps as soon as the first quarter, the report said.
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