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China Manufacturing Contracts for First Time in Six Months

Jan. 23, 2014
The sector was dragged down by cooling domestic demand.

BEIJING -- Casting a pall over growth prospects for the world's second-largest economy this year, a survey by HSBC showed that Chinese manufacturing contracted in January, the first time in six months.

HSBC's preliminary reading of China's purchasing managers' index (PMI), which tracks manufacturing activity in factories and workshops, fell to 49.6 in January, the lowest since August. The index is a closely watched gauge of the health of the Asian economic powerhouse.

The last time the figure for China dropped below the critical point was in July, when it stood at 47.7.

"The marginal contraction of January's headline HSBC Flash China Manufacturing PMI was mainly dragged by cooling domestic demand conditions," said Qu Hongbin, the bank's economist in Hong Kong.

"This implies softening growth momentum for manufacturing sectors, which has already weighed on employment growth," he said, adding Beijing was likely to maintain policy support for economic expansion.

The PMI announcement came after China on Monday said its 2013 economic growth came in at 7.7%, maintaining its slowest expansion in more than a decade.

The government has warned of "deep-rooted problems" the country faces this year, including a mountain of local authority debt, which experts consider a serious potential drag on the economy unless steps are taken to rein it in.

Copyright Agence France-Presse, 2014

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