China manufacturing activity unexpectedly shrinks for first time in four months
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Trump’s threat to impose a 10 per cent tariff on Chinese imports on Feb 1 risks exposing how reliant its economy is on exports for growth.
PHOTO: AFP
Beijing - China’s manufacturing activity unexpectedly contracted in January for the first time in four months, official data showed on Jan 27, as Beijing struggles to sustain the recovery of the world’s second-largest economy.
The official purchasing managers’ index (PMI) shrank to 49.1 in January from 50.1 in December, below the 50-mark separating growth from contraction and missing a median forecast of 50.1 in a Reuters poll.
The PMI stood at 50.1 in December, its third straight month in positive territory after ending a six-month decline in October.
January’s slide was “affected by the approaching Chinese New Year holiday and the concentrated return of business employees to their home towns”, top state statistician Zhao Qinghe said.
Both production and demand slowed in the run-up to the eight-day public holiday from Jan 28 to Feb 4, added Mr Zhao of the National Bureau of Statistics.
China’s economy hit the government’s growth target of “around 5 per cent” over 2024 but in a lopsided fashion, with exports and industrial output far outpacing retail sales and unemployment remaining elevated.
US President Donald Trump’s threat to impose a 10 per cent punitive duty on Chinese imports on Feb 1 to push Beijing to clamp down on trafficking of the chemical precursors of fentanyl risks exposing how reliant its economy is on exports for growth.
China’s trade surplus reached almost US$1 trillion (S$1.35 trillion) in 2024, as producers looked to shift stocks overseas to counter weak domestic demand.
The country’s outbound shipments were further assisted by factory gate deflation and a weak renminbi, making Chinese goods more competitive in global markets.
But back at home, falling prices ripped into corporate profits and workers’ incomes.
The non-manufacturing PMI, which includes services and construction, slowed to 50.2 from 52.2 in December.
Policymakers have promised to roll out further stimulus over 2025, but analysts worry it will remain focused on industrial upgrades and infrastructure, rather than households, which could worsen overcapacity in factories, weaken consumption and increase deflationary pressures.
Beijing has pledged to prioritise revitalising domestic demand, but has revealed little apart from a recently expanded trade-in programme that subsidises purchases of cars, appliances and other goods.
Chinese leaders are also hoping policy support measures in late 2024 will increase demand in the struggling property sector and ease developers’ financial difficulties, which significantly impacts domestic demand and local government finances.
Getting Chinese consumers spending again would reduce producers’ exposure to Mr Trump’s tariff threats, which he said on the campaign trail could be as high as 60 per cent.
Analysts polled by Reuters forecast the private sector Caixin PMI remained at 50.5. The data will be released on Jan 31. REUTERS, AFP
