Written by Joe Cash
BEIJING (Reuters) – China’s manufacturing activity barely rose in December despite a recovery in services and construction, an official survey showed on Tuesday, as the economy faces new trade risks. This suggests that policy stimulus is trickling down to some sectors as the economy prepares for the
The Purchasing Managers’ Index (PMI) released by the National Bureau of Statistics (NBS) in December slowed to 50.1 from 50.3 in the previous month and exceeded the 50 mark that separates growth from contraction, but the Reuters poll showed It did not reach the predicted median value of 50.3.
China’s $18 trillion economy is struggling to recover from the pandemic amid weak consumption and investment and a protracted real estate crisis. However, policymakers are hoping that the recent fiscal and monetary policy shock will trigger a turnaround in the real estate market, which has been dragging down the overall economy.
Improving domestic demand amid a global economic slowdown could benefit manufacturing and reduce the impact of new tariffs on Chinese goods proposed by President-elect Donald Trump.
“The worst part of the overcapacity seems to be over. Companies are receiving more orders,” said Xu Tiancheng, senior economist at the Economist Intelligence Unit. “However, there is a high risk that activity will slow down again if the stimulus wanes.”
“The bottom line is we need to stay stimulated.”
The manufacturing PMI’s new orders sub-index stood at 51.0 this month, up from 50.8 in November and the highest level in eight months. However, new export orders, employment and factory price sub-indices are all still in negative territory, according to the NBS.
Mixed industrial production and retail sales data for November released earlier this month highlights how difficult it will be for the Chinese government to achieve a sustained economic recovery in 2025. Government advisers have recommended that next year’s economic growth target be maintained at around 5.0% and that policymakers increase the rate. Reinforce consumer-focused stimuli.
The non-manufacturing PMI, which includes construction and services, rose to 52.2 this month after slowing to 50.0 in November. NBS analyzed that this rise was due to growth in China’s financial services, telecommunications and travel sectors.
China’s blue-chip index fell 0.6% on the news, while Hong Kong’s index rose 0.35%.
continue to inspire
Nomura analysts say it is too early to tell whether support measures, such as trade-in schemes for consumer goods and easing restrictions on real estate purchases, have had enough effect to put the economy on a flatter trajectory in the long term. I warned you that.
“The surge in purchases of consumer durables could have a significant payback effect. The real estate sector is yet to see a true recovery, weighed down by the debt burden of beleaguered developers,” they said. He said in the memo, adding that Trump would return to the White House. poses risks to Chinese exporters.
President Trump has vowed to impose a 10% tariff on Chinese products to force the Chinese government to stop trafficking in Chinese chemicals used to make fentanyl. During his campaign, he threatened to impose tariffs of more than 60% on Chinese goods, posing a major growth risk for the world’s largest exporter of goods.
At an agenda-setting meeting earlier this month, policymakers pledged to widen the budget deficit, increase bond issuance and ease monetary policy to support economic growth.
The World Bank last week raised its forecast for China’s growth in 2024 and 2025, but warned that weaker household and business confidence, as well as headwinds in the real estate sector, would weigh on economic growth next year. At its peak in 2021, the sector accounted for about a quarter of the economy.
The private sector Caixin Factory Survey will be released on Thursday, and analysts expect the figure to rise to 51.7.
China’s official December composite PMI, which includes both manufacturing and services activity, was 52.2 in December, up from 50.8 the previous month.
“It’s clear that the increased policy support towards the end of the year was a short-term boost to growth,” said Gabriel Ng, assistant economist at Capital Economics.
“However, this boost will likely last only a few quarters, as President Trump is likely to follow through on his tariff threats next year and deep-seated structural imbalances continue to weigh on the economy.”
