China’s manufacturing sector has encountered its fourth consecutive month of contraction in January, according to the latest official factory survey released on Wednesday. The official Purchasing Managers’ Index (PMI) inched up slightly to 49.2 from December’s 49.0, indicating persistent challenges for the world’s second-largest economy as it endeavors to regain momentum in the new year.
This data, aligning with predictions from a Reuters poll, offers a crucial snapshot of China’s economic health following a somewhat uncertain post-COVID recovery. Zhiwei Zhang, Chief Economist at Pinpoint Asset Management, noted that “economic momentum remained muted as the deflationary pressure persists,” anticipating a central bank rate cut in the first half of the year to stimulate domestic demand.
Despite a marginal increase in output, the manufacturing PMI continues to remain below the critical 50-mark, indicating contraction in the sector. Notably, the sub-indices for new orders and new export orders, standing at 49.0 and 47.2, respectively, underscore the ongoing challenges faced by the industry.
The manufacturing sector grapples with weak external demand, and the imminent Lunar New Year, which prompts earlier factory closures, adds to the complexity of the challenges.
In response to the economic headwinds, China’s central bank recently surprised the market by announcing a cut to banks’ reserve requirement ratio, reflecting efforts to bolster liquidity and support economic recovery. These measures aim to address the persisting challenges faced by the manufacturing sector and stimulate overall economic growth in China.
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