Manufacturing activity in China shrank at its fastest rate in four years in February, government data showed Tuesday, a fresh sign of sustained weakness in the world’s second-largest economy.
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The official manufacturing Purchasing Managers’ Index (PMI) is expected to dip to 49.3 in February from 49.4 a month earlier, according to a median forecast of 23 economists in a Reuters poll.
In a step to shore up slowing economic growth, China freed up more money for lending Monday, Feb. 29, 2016, by cutting the amount its banks are required to hold in reserve. It fell to 48.0, below market expectations of 48.3 and January’s reading of 48.4.
A separate private gauge, the Caixin China… For instance, in January, South Korea’s exports have suffered their worst downturn since the global financial crisis in 2009.
New York Fed’s manufacturing index fell for seven months in a row in February. Chinese factory gate prices fell for the 47th straight month in January.
While economic data out of China around this time of year usually reflects seasonal fluctuations because of a major annual holiday, the weak February manufacturing figures underline concerns over the country’s economy.
China’s economic growth cooled to 6.9 percent in 2015, the slowest pace in 25 years, and economists see it slowing further to around 6.5 percent this year. China said on Monday it expects to lay off 1.8 million workers in the coal and steel sectors as part of efforts to reduce industrial overcapacity, but no timeframe was given.
While the manufacturing sector is performing poorly, China’s services sector has been a source of crucial growth and jobs for China since 2015. But analysts have wondered how long services can remain resilient in the face of the deepening drag from the factory slump and widely expected layoffs.
China’s economic slowdown comes as policymakers in Beijing try to wean the economy off a exhausted model based on manufacturing and investment and refocus it on self-sustaining services and domestic consumption.
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“Today’s data suggest that policy makers will take further measures in the upcoming National People’s Congress in order to achieve a GDP growth target of 6.5 to 7% in 2016”, ANZ economists said in a note.
