Growth in China's factories, services slows in December

The official purchasing managers’ index stood at 51.4 in December compared with 51.7 in November

PUBLISHED : Sunday, 01 January, 2017, 11:38pm
UPDATED : Sunday, 01 January, 2017, 11:38pm

China’s manufacturing sector expanded for a fifth month last month, but growth slowed a touch more than expected in a sign that government measures to rein in soaring asset prices are starting to have a knock-on effect on the broader economy.

The official purchasing managers’ index (PMI) stood at 51.4 in December compared with 51.7 in November, data released on Sunday showed.

A reading above 50 indicates an expansion on a monthly basis while one below 50 suggests a contraction.

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December’s reading was slightly below the forecast in a Reuters poll for 51.5.

A housing boom in the second half of last year and a government spending spree on infrastructure have helped boost prices for commodities from cement to steel, giving the manufacturing sector a much-needed lift.

But the government is cracking down on speculative property buying, and signals from policymakers that more will be done to contain asset bubbles and rising debt – even at the expense of slower growth – means extra stimulus measures could be limited.

“Today’s PMI figures suggest that the change of policy tone has taken its toll, as the authorities are seriously concerned about the asset bubbles,” said Zhou Hao, senior economist at Commerzbank.

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Factory output slowed in December, with the sub-index hitting 53.3 compared with 53.9 the previous month.

Total new orders were flat at 53.2, logging the same as in November, while new export orders fell to 50.1 from 50.3.

Jobs were again lost, with the employment sub-index sitting at 48.9, compared to 49.2 in November, as the country pledged to cut excess capacity over a range of industries.

A sub-index for smaller firms fell, and performance for larger companies also worsened.

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A separate reading on the services sector showed the pace of growth slowed in December, the latest data showed.

The official non-manufacturing purchasing managers’ index stood at 54.5 in December, down from 54.7 in November, but above the 50-point mark.

Beijing is counting on growth in services – which account for more than half of gross domestic product – to offset persistent softness in exports that is dragging on the economy.

Private investment has also remained weak.

But growth for 2016 still looks set to hit Beijing’s target of 6.5 to 7 per cent, after expanding 6.7 per cent for each of the first three quarters.