China fac­tory out­put falls

The Pak Banker - - BUSINESS -

China's of­fi­cial fac­tory gauge sig­naled a record sixth straight month of de­te­ri­o­ra­tion, rais­ing the stakes for pol­icy mak­ers strug­gling to prop up the econ­omy amid a se­cond bear mar­ket in stocks since June and a cur­rency at a five-year low.

The pur­chas­ing man­agers in­dex dropped to a three-year low of 49.4 in Jan­uary, the Na­tional Bureau of Sta­tis­tics said Mon­day. That com­pared with a me­dian es­ti­mate of 49.6 in a Bloomberg sur­vey of econ­o­mists. Num­bers below 50 in­di­cate con­trac­tion. The of­fi­cial ser­vices in­dex also fell, while a pri­vate PMI sur­vey sig­naled the in­dus­try shrank an 11th month.

The re­ports could worsen the dilemma for pol­icy mak­ers: add mon­e­tary stim­u­lus to help stem the slow­down in growth, or avoid more eas­ing that could ex­ac­er­bate record cap­i­tal out­flows and put more pres­sure on the yuan. Chi­nese stocks fell, ex­tend­ing Jan­uary's steep­est monthly rout since 2008, threat­en­ing to fur­ther shake in­vestor faith in how top of­fi­cials can man­age the world's se­cond-largest econ­omy.

"What has hap­pened on the cap­i­tal ac­count, and how the au­thor­i­ties seem to want to re­spond to this in terms of poli­cies, make it harder for them to re­spond to the weak econ­omy by main­stream, force­ful mon­e­tary mea­sures," said Louis Kuijs, head of Asia eco­nom­ics at Ox­ford Eco­nom­ics in Hong Kong.

He said he ex­pects more "quasi-fis­cal poli­cies" such as ex­pe­dited spend­ing on in­fra­struc­ture to be an­nounced in com­ing months. The Peo­ple's Bank of China cut the main in­ter­est rate six times from late 2014 to late 2015 to a record­low 4.35 per­cent.

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