A worker performs welding at an agricultural machinery manufacturing company in the Qingzhou Economic Development Zone in Qingzhou, China, on August 31, 2024.
Cost Photo | Null Photo | Getty Images
China’s factory activity growth in December fell short of analysts’ expectations on Tuesday, suggesting that the Chinese government’s stimulus plans were insufficient to meaningfully boost China’s struggling economy.
The country’s official purchasing managers index stood at 50.1 in December, according to data released by the National Bureau of Statistics.
This was lower than Reuters’ forecast of 50.3. Manufacturing activity was 50.3 in November and 50.1 in October. A PMI reading above 50 indicates an expansion in activity, while a reading below it indicates a contraction.
According to the National Bureau of Statistics, production and new orders increased in sectors such as agriculture and sideline food processing, general equipment, and food and beverages.
China’s non-manufacturing PMI, which measures activity in services and construction, rose to 52.2 in December from 50.0 the previous month.
Of the 21 industries surveyed, 17 recorded higher activity than the previous month, including aviation, transportation and communications. The construction industry also returned to its expansionary trend due to the Spring Festival holiday.
“I think one of the reasons why the non-manufacturing PMI fluctuated so much last month was because the construction PMI dropped significantly,” said Tommy Hsieh, head of Asia macro research at OCBC. .
Investors will also be keeping an eye on the Caixin/S&P Global Manufacturing Purchasing Managers’ Business Index, which is scheduled to be released on Thursday.
“For China’s economy, 2024 will be remembered as the year of overcoming challenges,” said Larry Hu, chief China economist at Macquarie Group.
“Deflationary pressures continue as policy stimulus is sufficient to meet gross domestic product (GDP) targets but is far from reinvigorating the economy,” he added.
China’s economy has shown some signs of recovery following a series of economic stimulus measures introduced in late September.
“Overall, (China’s) recovery is still continuing,” Xie said. “China will achieve its growth target of about 5% this year, probably about 4.9%, so we will see some recovery in 2024,” he added.
The World Bank on Thursday raised its forecast for China’s economic growth in 2024 and 2025, reflecting recent policy adjustments. China’s GDP is expected to grow by 4.9% in 2025 (compared to the previous forecast of 4.8%).
However, other recent economic data from China shows that the world’s second-largest economy remains on the brink of disinflation, largely due to weak consumer demand and a long-term downturn in the real estate market. is the cause.
China’s consumer inflation rate fell to a five-month low in November, while the country’s import and export statistics were weaker than expected. Additionally, the latest retail sales figures were disappointing, falling short of Reuters’ expectations.
China’s industrial profits fell for the fourth straight month, falling 7.3% in November from a year earlier.
Last week, China’s Ministry of Finance announced that it would increase fiscal support next year with the aim of stimulating consumption by increasing the trade-in of consumer goods, raising pensions, and increasing medical insurance subsidies for residents.
According to Reuters, Chinese authorities have also decided to issue a record 3 trillion yuan ($411 billion) in special bonds next year to boost fiscal stimulus.
With Donald Trump in the White House, China will face even greater challenges. President Trump’s threat to impose higher tariffs on Chinese goods could further hurt China’s export sector, which is already dealing with increasing trade barriers from the European Union.
