China’s Manufacturing Contracts in December, Indicating Sluggish Economy
The latest survey of factory managers in China reveals a contraction in manufacturing in December, indicating ongoing sluggishness in the country’s economy. The National Bureau of Statistics reported that the official Purchasing Managers Index (PMI) fell to 49 last month, providing evidence of weak demand. This marks the third consecutive month of contraction. The PMI is measured on a scale up to 100, with 50 serving as the threshold between expansion and contraction.
The index has declined in eight of the past nine months, with a brief increase only in September. In November, the index stood at 49.4, down from 49.5 the previous month.
To stimulate domestic demand and sustain growth, the Chinese regime has implemented various measures in recent months. These include increased spending on infrastructure construction, interest rate cuts, and relaxed restrictions on home-buying. However, global demand for manufactured goods has been impacted by central banks worldwide raising interest rates to combat high levels of inflation. While price pressures have eased in recent months, demand has yet to rebound to pre-pandemic levels. This situation has significant implications for the region, as supply chains connected to China are spread across numerous Asian countries.
On a positive note, China’s non-manufacturing PMI rose to 50.4 in December, according to the statistics bureau. However, the sub-index for the service sector PMI remained unchanged at 49.3, the same as November’s reading.
Despite a housing market slump caused by a crackdown on excessive borrowing by property developers, the construction industry is thriving. The sub-index for this sector climbed to 56.9 in December, well into expansionary territory, compared to 55 in November.
In conclusion, China’s manufacturing sector continues to face challenges, with weak demand and ongoing contraction. Efforts to stimulate domestic demand and sustain growth are being implemented, but global demand for manufactured goods remains subdued. The construction industry, however, is experiencing growth despite the housing market slump. These factors have significant implications for the region and its interconnected supply chains.
