-Qu Hongbin, HSBC chief economist for China
The official gauge of China's manufacturing activity dropped into the contraction territory for the first time since September 2012, according to the China Federation of Logistics and Purchasing. The manufacturing PMI declined to 49.8 in January, down from 50.1 a month earlier, missing analysts' expectations for a 50.2 reading. Although sub-components of overall output and new orders rose in January, other sub-indices including new export orders, stocks of finished goods, backlogs of orders declined. Another report from the British banking giant HSBC also pointed to contraction in the Chinese factory activity. The HSBC Manufacturing PMI for January inched higher to 49.7 in January, up from 49.6 in December, and revised down from an earlier flash reading of 49.8.
Shrinkage in the manufacturing activity in the world's second biggest economy comes at the time of property market slump and may fuel concerns about the future prospects of the Chinese economy. China's economy has been losing steam in recent years, last year recording just 7.4% growth, which was the slowest pace in more than two decades. Yet the government has been calm so far saying that the slowdown is under control as employment has remained strong. However, Beijing has taken steps to support growth, deploying stimulus measures last year and even slashing benchmark interest rates in November for the first time in more than two years.
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