China’s Manufacturing Sector and Economic Resilience

<div><img width="1000" height="667" src="https://www.financebrokerage.com/wp-content/uploads/2020/08/shutterstock_1191365239.jpg" class="attachment-post-thumbnail size-post-thumbnail wp-post-image" alt="China’s Manufacturing" decoding="async" loading="lazy" /></div><h1>China’s Manufacturing Sector and Economic Resilience</h1>
<p><a href="https://www.financebrokerage.com/unraveling-the-fallout-of-chinas-property-crisis/">China’s manufacturing</a> landscape faced its fourth consecutive month of contraction in January, reflecting challenges in regaining momentum amidst a global economic slowdown. The official purchasing managers’ index (PMI) rose slightly to 49.2, indicating a marginal improvement but still below the growth threshold of 50. The persistently weak external demand and a property downturn have added complexity to the efforts of authorities seeking to revitalise the economy.</p>
<h2>New Orders and Export Challenges</h2>
<p>January’s new orders sub-index contracted for the fourth consecutive month at 49.0, underscoring the subdued domestic demand. Additionally, the new export orders index registered a concerning 47.2, contracting for the 10th straight month, signifying challenges in global trade. The weakness in external demand and a looming property downturn have posed a formidable hurdle for China’s manufacturing sector.</p>
<h2>Central Bank’s Response and Policy Measures</h2>
<p>In an unexpected move, China’s central bank governor, Pan Gongsheng, announced a cut to banks’ reserve requirement ratio in a bid to spur growth. This proactive measure aims to inject liquidity into the system, alleviating pressures from a property downturn, local government debt risks, deflationary forces, and weak global demand. The authorities face a multifaceted challenge in balancing economic revitalisation amid various risks.</p>
<h2>Non-Manufacturing Resilience and Composite PMI</h2>
<p>While manufacturing faces headwinds, China’s non-manufacturing sector, encompassing services and construction, showed resilience. The non-manufacturing PMI rose to 50.7 in January, the highest since September the previous year. Despite two months of contraction, the services sub-index returned to growth, albeit with construction growing slower. Combining manufacturing and services, the composite PMI reached a four-month high of 50.9 in January, reflecting a broader economic uptick.</p>
<p>China’s economic landscape remains a dynamic challenge, with manufacturing grappling with headwinds. The central bank’s decisive measures aim to counter these challenges. Still, sustaining growth requires a delicate balance amid a property downturn and global economic uncertainties.</p>
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<h2>BONUS VIDEO: Weekly news summary from the markets</h2>
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