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BEIJING: China’s factory activity growth slowed in January as a resurgence in COVID-19 cases and strict lockdown measures hit output and demand, but the slight expansion offered some signs of resilience as that the world’s second-largest economy is entering a likely bumpy year.

The official manufacturing Purchasing Managers’ Index (PMI) registered 50.1 in January, staying above the 50-point mark that separates growth from contraction, but slowed from 50.3 in December, data showed. the Office for National Statistics (NBS) on Sunday (Jan 30). ).

Analysts had expected the PMI to fall to 50.

The official results contrasted with those of a private survey of most small manufacturers in coastal regions, which showed activity fell at the fastest pace in 23 months.

China’s economy started last year strong, recovering from a sharp pandemic-induced slump, but began to lose momentum in the summer, weighed down by debt problems in the housing market and strict anti-virus measures that hit confidence and spending. of consumers.

Rising raw material costs and weak demand have also eroded corporate profit margins. Industrial company profits rose at their slowest pace in December for more than a year and a half.

With the real estate slump expected to last through at least the first half of this year and the emergence of more infectious variants of COVID-19, China’s central bank has started cutting interest rates and pumping in more cash. in the financial system to reduce borrowing costs. More modest easing measures are expected in the coming weeks.

Stability will prevail especially ahead of a once-in-five-year Communist Party congress this year, with policymakers seeking 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 are preparing to raise interest rates, which could spur potentially destabilizing capital outflows from emerging markets such as China.

The International Monetary Fund on Wednesday cut its 2022 China growth forecast to 4.8% from 5.6% previously, reflecting real estate problems and the impact on consumption of tight COVID-19 restrictions.

“Industrial activity slowed due to weak domestic demand,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management. “The service sector is also negatively affected by the outbreaks in many cities.”

“The weak PMI indicates that the government’s policy easing measures have not yet trickled down to the real economy… We expect the government to step up policy support in the coming months, particularly through higher fiscal spending.”

A sub-index in the official PMI for output came in at 50.9, down from December’s 51.4, 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, a spike in infections since late December in the Xi’an manufacturing hub has forced many car and chipmakers to shut down operations. . Production has gradually returned to normal as the city has emerged from lockdown.

Last month, Samsung Electronics temporarily adjusted operations at its Xi’an manufacturing facility for NAND flash memory chips, but said on Wednesday that production has returned to normal.

Production in Tianjin, which has battled an outbreak of the highly transmissible Omicron variant, was also affected.

At the same time, the government is trying to limit levels of industrial air pollution ahead of the Beijing Winter Olympics, which start on Friday. China has told mills in northern regions to cut output until mid-March.

A survey of China’s expanding services sector also showed growth slowing in January as virus containment measures hit consumer sentiment.

China’s official composite PMI, which combines manufacturing and services, stood at 50.1 in January compared with 52.2 in December.

China’s economy grew 4.0 percent in the fourth quarter from a year earlier, its weakest expansion in a year and a half.

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