By Joe Cash
BEIJING (Reuters) – China's manufacturing activity grew weakly in December despite services and reconstruction, official surveys showed on Tuesday, suggesting that policy stimulus is slowing in some sectors as the economy prepares for new trade risks.
The National Bureau of Statistics (NBS) purchasing managers' index (PMI) fell to 50.1 in December from 50.3 the previous month, remaining above the 50 points that separate growth from contraction but missing the median forecast of 50.3 in a Reuters poll.
China's $18 trillion economy has struggled to recover from the pandemic amid weak consumption and investment, and a lingering property crisis. However, policy makers hope that the latest blitz of monetary and fiscal measures will cause a change in the property market, which has dragged on the wider economy.
Improved domestic demand could help manufacturers amid a global economic slowdown, reducing the impact of US President-elect Donald Trump's proposed new tariffs on Chinese goods.
“The worst part of the volume seems to be over, businesses are getting a lot of orders,” said Xu Tianchen, an economist at the Economic Development Unit. “But there's a big risk of a slowdown in activity again if stimulation is reduced.”
“The main thing is that the stimulus must be maintained.”
The manufacturing PMI new orders index rose to 51.0 this month—an eight-month high—from 50.8 in November. But new export orders, employment, factory-gate price indices all remained firm in negative territory, the NBS said.
The mixed manufacturing and retail sales data for November released earlier this month underscores how challenging it will be for Beijing to raise a sustainable economy by 2025. up customer-focused innovation.
The non-manufacturing PMI, which includes construction and services, rose to 52.2 this month, after declining to 50.0 in November. The NBS cited an upward trend in the growth of China's financial services, telecommunications and travel sectors.
Following the data, China's blue chip index fell by 0.6%, while Hong Kong rose by 0.35%.
KEEP THE REVIVAL COMING
Analysts at Nomura cautioned that it was too early to say whether support measures such as the consumer goods trading scheme and easing restrictions on property purchases, for example, had done enough to get the economy on a more keel in the long term.
“The increase in the purchase of durable goods can be followed by significant recovery effects. The property sector has not really recovered, weighed down by the debt burden of distressed developers,” they said in the article, adding that Trump is back in the White House. poses a risk to Chinese retailers.
Trump has vowed to impose a 10% tariff on Chinese goods to force Beijing to stop selling Chinese-made chemicals used in the production of fentanyl. He also promised tariffs of more than 60% on Chinese goods during his campaign, which poses a serious threat to growth in the country's top exporter.
At an agenda-setting meeting earlier this month, policymakers promised to expand the budget deficit, issue more debt and loosen monetary policy to support economic growth.
The World Bank last week raised its growth forecasts for China in 2024 and 2025, but warned that household and business confidence, as well as heads in the property sector, will weigh on economic growth next year. At its peak in 2021, the sector accounted for about a quarter of the economy.
The Caixin private sector factory survey will be released on Thursday and analysts expect its reading to reach 51.7.
China's official December composite PMI, which includes manufacturing and services jobs, rose to 52.2 in December, from 50.8 in the previous month.
“The increase in policy support at the end of the year clearly provided near-term growth,” said Gabriel Ng, assistant economist at Capital Economics.
“But the increase may not last more than a few quarters, and Trump is likely to follow through on his tax threat next year with structural imbalances still running through the economy.”