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China Jan factory growth slips to six-month low

Reuters . Beijing

A file photo shows a worker wearing protective glasses welds steel products at a heavy equipment manufacturing factory in Luoyang, Henan province. — Reuters photoA file photo shows a worker wearing protective glasses welds steel products at a heavy equipment manufacturing factory in Luoyang, Henan province. — Reuters photo

China’s factory growth eased to an expected six-month low in January, hurt by weaker local and foreign demand, a survey showed, a soft start for the year that heightens worries of an economic slowdown.
The official Purchasing Managers’ Index edged down to 50.5 in January from December’s 51, the National Bureau of Statistics said on Saturday, in line with market expectations.
The change reinforces concerns that China’s economy is stuttering and could drag on financial markets on Monday as global investors, already nervous about capital flight in emerging markets, find another reason to sell riskier assets.
Emerging market stocks and currencies were sold off in the past week as investors cut financial bets in developing nations, in anticipation that the United States will continue to move to less easy monetary policy. Super-easy US policy had spurred a flow of cash into emerging markets in recent years.
Saturday’s PMI showed China’s factories saw fewer export orders and slacker growth in new orders last month. A sub-index for new orders fell to a six-month low of 50.9, and export orders slipped to 49.3, also a six-month low and below the 50-point threshold separating growth from contraction in PMIs.
An employment sub-index fell to an 11-month low of 48.2.
Analysts had cautioned before Saturday’s release that the ongoing Lunar New Year holiday, which began on January 31, probably dragged on factory output in January as manufacturers shut shop for China’s biggest annual holiday.
But seasonal factors aside, most analysts noted that China’s economy was fighting headwinds that would only grow in coming months as the country hunkers down for sweeping reforms.
A Reuters visit to China’s southern manufacturing heartlands in January had showed factories smarting from lacklustre demand. Discouraged, many had packed up earlier than usual for the holidays.
‘We expect China’s first-quarter economic growth to show a certain degree of a slowdown,’ ANZ economists Liu Ligang and Zhou Hao said in a note. ‘China should lower its annual economic growth target to 7 per cent.’
The official PMI echoes a separate private survey published by HSBC this month that also showed factory growth in the world’s second-biggest economy retreated to a six-month trough in January.
It is widely understood among investors that the days of stellar, double-digit economic growth in China are over as it tries to embrace slower but better-quality growth to protect its environment and cut reliance on investment.




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