BEIJING: According to an official factory survey released on Friday, China’s manufacturing activity shrank in February for the fifth consecutive month. This puts more pressure on authorities to implement more stimulus measures as factory owners struggle to get orders.
The official purchasing managers’ index (PMI) dropped from 49.2 in January to 49.1 in February, which is in line with a median expectation of 49.1 in a Reuters poll and below the 50-point threshold that divides growth from contraction.
Given that this year’s Lunar New Year (LNY) fell on February 10 and that companies were closed while employees celebrated at home, seasonal variables may have had an impact on the number.
China’s lacklustre post-COVID recovery has fueled predictions that officials will need to take more radical measures to support longer-term development and cast doubt on the viability of the country’s economic model.
The second-biggest economy in the world has struggled with poor growth over the past year due to a real estate crisis, consumer spending slowdowns, foreign company divestitures, difficulty finding customers, and massive debt loads for local governments.
Thanks to strong activity over the LNY holidays, the official non-manufacturing PMI, which covers services and construction, increased to 51.4 from 50.7 in January, the highest figure since September of last year.
Following the minimal impact of the measures put in place since June, policymakers have committed to implementing additional measures to support growth.
With the largest reduction in two years, the People’s Bank of China lowered the reserve requirement ratio (RRR) for banks on February 5, freeing up 1 trillion yuan ($139.03 billion) in long-term liquidity.
As part of his efforts to rebalance the economy by utilising technology to boost productivity and income, Chinese President Xi Jinping chaired a meeting of a significant economic policy-making body on Friday. The meeting focused on supporting manufacturers through equipment upgrades and lowering logistics costs.
China’s growth target for 2024 won’t be announced until next Tuesday, but analysts predict Beijing will stick to its around 5% growth aim from the previous year. – Reuters
