China’s manufacturing growth contracts in December

The Dollar Business Bureau

China’s manufacturing sector registered a sluggish growth in December, giving a sign that the government’s initiatives to control the escalating asset prices have started to reflect on the Chinese economy.

The country’s Purchasing Managers' Index (PMI), an indicator of the health of the country’s manufacturing sector, fell marginally to 51.4 in December as against 51.7 in November. December reading of the PMI was slightly below than the country expected.

The government’s increased spending on the country’s infrastructure, supplemented by a housing boom during the second half of last year, has helped boost domestic prices for essential commodities such as cement and steel, thereby giving a much-needed fillip to the manufacturing sector.

Meanwhile, the Chinese government is also cracking down on property buying, while giving signals that the government will do much more to contain increasing asset prices and rising debt.

Factory output also slowed down last month, with the sub-index coming down to 53.3 compared with 53.9 in December last year.

Total new orders remained stagnant at 53.2, while new export orders fell from 50.3 to 50.1.

The overall decline in manufacturing had a direct impact on the country’s jobs generation, as the employment sub-index fell to 48.9 compared with 49.2 in November.

Meanwhile, the sub-index for smaller firms and performance for larger companies also fell in the month.

The index reading above 50 indicates expansion, while one below 50 suggests a contraction on a monthly basis.

According to the data released on Sunday, the country’s non-manufacturing Purchasing Managers' Index (PMI) i.e. service sector PMI, stood at 54.5 in December, compared with 54.7 in November.

China is counting heavily on its service sector growth, to mitigate its slowdown in exports. Notwithstanding the domestic slowdown, the country’s GDP growth looks set to cloak 6.5 – 7%. The GDP expanded 6.7% for each of the first three quarters last year.