- Zhao Qinghe, a senior statistician at the National Bureau of Statistics
Activity in China's manufacturing sector slowed to the lowest level since June 2013 in December amid weaker demand from overseas at the end of the year, according to the government's official data. The manufacturing Purchasing Managers' Index dropped closer to the edge of expansion versus slowdown, falling to 50.1 in December, compared with November's reading of 50.3. The data from HSBC and research firm Markit showed that manufacturing PMI fell to 49.6 in December, down from 50.0 in the preceding month. The official PMI data showed a small recovery in export orders, with the corresponding sub-index climbing to 49.1 from 48.4, while new orders overall dropped to 52.2 from 52.5, suggesting China's domestic demand is weakening. Both PMIs also showed that wholesale prices for raw materials and manufactured goods continued to decline, with the official PMI sub-index for raw material prices falling to 43.2, the lowest for 2014. China's manufacturing sector has been hit by deflation for almost three years, due to a combination of excess domestic factory capacity and declining prices for raw materials on global markets. While lower input prices are beneficial for companies, deflation also makes it harder for them to repay their loans. In order to support the world second biggest economy, the People's Bank of China slashed benchmark interest rate to 2.75% in November, the first interest rate cut since 2012.
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