China says factory activity grew in December

China’s factory activity expanded for a second month in December, beating expectations after six straight months of contraction


Chinese manufacturing activity expanded for a second month in December. Estimates were beaten largely thanks to government stimulus measures.

An abatement in trade tensions with the United States encouraged a pick-up in new orders and overseas sales.

The official National Bureau of Statistics manufacturing PMI index held at 50.2 in December, unchanged from November, but above analyst estimates for a dip to 50.1 and marking the second straight month of expansion. A reading of 50 divides growth from contraction.

“The above-forecast Manufacturing PMI is yet another sign the economy has passed the short-term low point," said FXCM analysts in a note. "The gauge rose above 50 in November, unexpectedly ending six straight months of contraction as Beijing’s accelerated stimulus measures buoyed domestic demand.”

Washington and Beijing have agreed to sign a “phase one” deal in early January, aimed at resolving the almost two-year trade conflict that has seen both sides slap billions of dollars-worth of tariffs on each others’ exports.

The dispute has weighed on global growth to the point that the OECD believes economic expansion in 2020 will run at its weakest rate since the global financial crisis of 2008/2009.

Chinese growth has gradually been slowing for nearly two years, reaching 6 per cent in the third quarter of 2019, its lowest since the start of 1992.

In response, the central bank, the People’s Bank of China (PBoC), has taken steps to loosen monetary policy and shore up the economy by cutting various lending rates and encouraging borrowing.

The official manufacturing survey showed the new orders index rose to 51.3 from 51.2, while overseas sales rose to 50.3 from 48.8, in a sign that the slide in factory activity and exports may have bottomed.

FURTHER READING: China bucks the upward trend as slump in factory profits hits Shanghai shares

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