PMI shows slight cooling in factories

More pro-growth policies are needed to boost market sentiment and manufacturing activity, economists and industry insiders said on Sunday after the National Bureau of Statistics unveiled China’s latest official manufacturing purchasing managers’ index.

A key gauge of manufacturing activity, it came in at 50.1 in January, down from 50.3 in December. The 50-point mark separates growth from contraction.

Zhao Qinghe, a senior NBS statistician, said in a note accompanying the data that China’s economic growth stayed on track for continuing recovery in January in the face of complicated economic conditions and sporadic COVID-19 cases, although economic activity cooled slightly.

“In January, some manufacturing sectors have stepped into the offseason of their production, while a recent cooling of demand has added to the weakening expansion of manufacturing”, Zhao said.

The bureau’s composite PMI, including manufacturing and services activity, stood at 51, compared with 52.2 in December. The official PMI for China’s nonmanufacturing sector came in at 51.1 this month, down from 52.7 in December.

Wen Bin, chief analyst at China Minsheng Bank, said the PMI figures indicate the country faces some downward pressure, with domestic demand remaining inadequate. He said the United States’ Federal Reserve is moving toward tightening, but China still has room to introduce pro-growth measures, such as cutting taxes and fees and lowering interest rates, before it does so.

“These measures should be put in place in advance,” Wen said.

The privately compiled Caixin China General Manufacturing Purchasing Managers’ Index, also released on Sunday, fell to 49.1 this month, the lowest level since March 2020.