China’s December plant activity has risen ahead of the wind-blown economy ahead of Reuters

BEIJING (Reuters) – China’s factory activity accelerated unexpectedly in December, but only slightly, according to an official survey on Friday, analysts predicted more economic downturns in the short term and pressure from policymakers to offer support measures.

The Manufacturing Purchasing Managers ’Index (PMI) rose to 50.3 from 50.1 in November, according to data from the National Statistics Office (NBS).

Analysts had expected it to fall slightly to the 50-point mark, which separates growth and contraction.

The world’s second-largest economy has lost steam since early summer after recovering from last year’s pandemic downturn, a slower manufacturing sector, real estate market debt problems, carbon-related cuts and small-scale COVID-19 outbreaks. .

Next year, China will face “unprecedented” difficulties in stabilizing trade, Deputy Foreign Minister Ren Hongbin warned on Thursday that production capacity in other exporting countries is recovering from COVID-induced blows and competing with Chinese exports.

“Looking ahead to January, we expect the manufacturing PMI to fall to 50.0, with stricter anti-pollution measures slowing down than usual to secure the blue skies for the upcoming Winter Olympics, which begin in early February, and reduce demand. in a note.

The sub-index of the new orders for the Bureau of Statistics improved slightly in December, but continued to shrink from 49.7 in November to 49.4.

The new export orders were further reduced, with the sub-index entering 48.1 compared to 48.5 a month earlier, indicating a fragile foreign demand.

A sub-index of production stood at 51.4 in positive territory, but was lower than 52.0 in November.

“We believe that the pain threshold is higher than in previous cycles, as Beijing has given more weight to long-term goals than short-term growth stability,” Nomura said.

“Still, there is a limit that will allow growth to slow down, and that limit could be seriously tested in the spring of 2022.”

COVID DECISIONS

Wealthy Zhejiang province on the east coast of China saw the emergence of small-scale COVID-19 in December, and it has now calmed down, but some companies have been forced to suspend production.

In the northwest, the Xian Industrial and Technology Center has been under blockade as a 13-million-strong local presence continues to spread.

Samsung Electronics (OTC 🙂 and Micron Technology (NASDAQ :), two of the world’s largest memory chip manufacturers, have warned that the city’s ongoing blockade could affect the basics of the surrounding chip manufacturing.

Activity in China’s overall services sector grew slightly faster in December, rising from 52.7 to 52.3 in November.

China’s official composite PMI, which includes manufacturing and services activity, stood at 52.2 in December from November.

Analysts expect a slowdown in gross domestic product (GDP) in the fourth quarter, with the economy growing by 4.9% between July and September.

The debt crunch of major real estate developers has hurt an industry that is key to China’s economic growth amid crackdown on the real estate sector.

The central bank cut its reserve requirement ratio (RRR) in mid-December – the amount of money banks need to hold in reserve – to boost economic growth.

The bank has said it will maintain a flexible monetary policy next year as it seeks to stabilize growth and reduce corporate financing costs amidst the windy economic winds.

Bruce Pang, head of macro and strategy research at China Renaissance Securities, said more support measures would be rolled out.

“We believe that 2022 should lead to a more focused easing of a smooth landing and support for SMEs, high-tech and innovation companies, advanced manufacturing and green industries,” Pang said.