Introduction
China’s manufacturing sector is facing ongoing challenges as data from a Reuters poll suggests that manufacturing activity likely contracted for the fourth consecutive month in January, albeit at a slower pace than in December. This struggle for momentum in the sprawling sector is evident as the official purchasing managers’ index (PMI) is expected to inch up to 49.2 in January, slightly higher than December’s 49.0. The PMI serves as a gauge, with a score below 50 denoting contraction while a score above 50 signifies growth.
Economic Snapshot and Recovery
On Wednesday, the National Bureau of Statistics will release the PMI data, providing an initial official overview of how the world’s second-largest economy has fared at the start of 2024, following a post-COVID recovery that fell short of expectations. The recovery has been marred by challenges such as a property downturn, local government debt risks, deflationary pressures, and weak global demand.
Central Bank Measures
In a surprising move aimed at stimulating growth, China’s central bank governor, Pan Gongsheng, announced a reduction in banks’ reserve requirement ratio during a press conference last week. This unexpected measure reflects the government’s determination to combat the headwinds faced by the economy.
Anticipated Forecast
The upcoming private Caixin factory survey, to be released on Thursday, is expected to reveal a decline in factory activity, with a projected drop from December’s 50.8 to 50.6 in January. This aligns with the muted growth indicated by the official PMI data. By taking steps to address the challenges impeding growth, China aims to navigate through the current turbulent economic landscape. The outcome of these efforts will be closely monitored to gauge the potential trajectory of the country’s manufacturing sector in the months ahead.