China manufacturing activity contracts for first time in four months

China’s manufacturing activity shrank in January for the first time in four months, official data showed Monday, as Beijing battles to sustain the recovery in the world’s second-largest economy.

Policymakers have battled to reverse a post-pandemic slump driven by a crisis in the property sector, weak consumption and high government debt.

The Purchasing Managers’ Index (PMI) — a key measure of industrial output — came in at 49.1 in January, according to the National Bureau of Statistics (NBS), below the 50-point mark that separates growth and contraction.

The reading was down from 50.1 in December, which was its third straight month in positive territory after ending a six-month decline in October.

January’s slide was “affected by the approaching Lunar New Year holiday and the concentrated return of business employees to their hometowns”, NBS statistician Zhao Qinghe said.

Both production and demand slowed in the run-up to the eight-day public holiday from January 28 to February 4, Zhao said.

“Economic momentum unexpectedly slowed in both manufacturing and service sectors ahead of the Chinese New Year,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, wrote in a note.

“Part of the slowdown may be due to weaker external demand, as the new export orders index dropped to the lowest level since March last year,” Zhang said.

Beijing has unveiled a string of aggressive measures in recent months aimed at boosting growth, including cutting interest rates, cancelling restrictions on homebuying and easing the debt burden on local governments.

But economists have warned that more direct fiscal stimulus aimed at shoring up domestic consumption is needed to restore full health in the economy, which has struggled to fully recover since the Covid-19 pandemic.