BEIJING (Reuters) - Growth in
China’s factory activity slowed in January as a resurgence of COVID-19 cases and tough lockdowns hit production and demand, but the slight expansion offered some signs of resilience as the world’s second-largest economy enters a likely bumpy new year.
The official manufacturing Purchasing Manager’s Index (PMI) registered 50.1 in January, remaining above the 50-point mark that separates growth from contraction, but slowing from 50.3 in December, data from the National Bureau of Statistics (NBS) showed on Sunday.
Analysts had expected the PMI to fall to 50.
China’s economy started last year strong, reviving from a sharp pandemic-induced slump, but it started losing momentum in the summer, weighed down by debt problems in the property market and strict anti-virus measures that hit consumer confidence and spending.
Rising raw material costs and soft demand have also eroded corporate profit margins. Profits at industrial firms rose at their slowest pace in December for more than a year and a half.
With the real estate slump expected to drag on through at least the first half of this year and the emergence of more infectious COVID-19 variants, China’s central bank has started cutting interest rates and pumping more cash into the financial system to lower borrowing costs. Further modest easing steps are expected in coming weeks.
Stability will trump everything ahead of a once-in-five-years Communist Party congress this year, with policymakers looking to ward off a sharper slowdown that could undermine job creation.
But such easing carries risks, as other global central banks like the U.S. Federal Reserve are preparing to raise interest rates, which could spur potentially destabilising capital outflows from emerging markets like China.
The International Monetary Fund on Wednesday cut its China 2022 growth forecast to 4.8%, from 5.6% previously, reflecting the property woes and the hit to consumption from strict COVID-19 curbs.
China’s economy grew 4.0% in the fourth quarter from a year earlier, its weakest expansion in one and a half years.