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China Factory Activity Set to Fall Again But at Slower Rate

Economists are predicting another month of manufacturing contraction in the world’s No2 economy as it continues to struggle post-Covid

China factory activity
A man wearing a mask works in a bicycle rim factory in Hangzhou, Zhejiang province, on March 2, 2020. Pic: China Daily via Reuters


China’s factory activity is likely to have shrunk again though forecasters are predicting the pace of the slowdown will have slackened.

The official purchasing managers’ index (PMI), due out on Wednesday, likely nudged up to 49.2 in January from December’s 49.0, according to the median forecast of 35 economists in a poll. The 50-point mark separates growth from contraction.

The National Bureau of Statistics’ PMI data will provide the first official snapshot of how the world’s No2 economy has started off the new year after a shakier-than-expected post-Covid recovery.

To spur growth, China’s central bank governor Pan Gongsheng unexpectedly announced a cut to banks’ reserve requirement ratio at a press conference last week, as the challenges of a property downturn, local government debt risks, deflationary pressures and weak global demand weigh on the economy.


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Only one of 35 economists surveyed in the poll expected factory activity to expand in January, with a forecast of 50.5.

But Goldman Sachs said in a note on Friday that NBS manufacturing PMI tends to decline in January going by seasonal patterns as suggested by historical data during the years when the Lunar New Year falls in late January or in February. It expects the index to moderate to 48.8 from 49.0 in December.

The private Caixin factory survey, which will be issued on Thursday, is expected to show factory activity slowed to 50.6 from 50.8 in December, according to the median forecast of 21 economists polled by Reuters.

Compounding the pain for some Chinese exporters, disruptions to Red Sea freight due to drone attacks on shipping by Houthi rebels have added to supply snarls for factories ahead of the Lunar New Year that starts on Feb. 10 this year.


  • Reuters with additional editing by Sean O’Meara


Read more:

China’s Factory Slump Deepens, Stimulus Pressure Grows

Asian Manufacturing Soft in December Amid Weak China Activity

Analysts Wary Despite China’s Factory, Consumption Growth

Factory Activity in China Falls in October, Undermining Recovery

China’s Factory Activity Expanded in September, Survey Finds



Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


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