China’s Manufacturing Sector Set to Close 2014 on a Weak Note as Production Activity Contracts

A recently conducted private survey indicates a contraction in the factory activity in China. This adds weight to the view that China is in need of a strong stimulus. The findings are a part of the manufacturing purchasing managers’ index (PMI) gauged by HSBC/Markit. In November 2014, the reading of the index stood at 50, whereas in December it dipped to 49.5. An index reading higher than 50 denotes expansion, whereas anything lower than 50 points indicates contraction between two months.

The official PMI for December is slated to be released around the New Year by China. In November 2014, the official PMI released by China stood at 50.3. However, the latest reading from the HSBC/Markit survey puts Chinese manufacturing activity at a seven-month low.

According to HSBC China’s Chief Economist, Qu Hongbin, the domestic demand in China became sluggish and dipped below the 50-point mark for the very first time in the seven months leading back to April 2014. A sharp fall has also been noticed in the price indices. With this slowdown making its way into December, the year ends on a weak note for the Chinese manufacturing industry.

Earlier in December 2014, the central bank of China said that the country’s growth could decelerate to 7.1% in 2015, from 7.4% in 2014. The slump in the property market in China is the key reason for this. In the third quarter of 2014, growth in China’s economy slid to 7.3%. Since the 2008 global economic crisis, growth has never been this sluggish in China. And, it is for the first time in about 15 years that market watchers are speculating that China will miss its 7.5% official growth target.


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