China’s Factory Activity Slows Down in December Despite Stimulus Measures and Trade Risks

China’s factory activity expanded at a slower pace in December, according to official data released on Tuesday. Despite recent stimulus measures and increasing trade risks, the Purchasing Managers’ Index slipped to 50.1 in December from 50.3 the previous month, marking the third straight monthly reading above 50, indicating an expansion of manufacturing activity.

The decline in factory activity was attributed to a drop in the output component, which reflects downward pressure on prices according to Capital Economics’ Gabriel Ng. However, new orders rose to an eight-month high and the exports order index increased to the highest level in four months. This surge in exports orders may have been driven by U.S. importers rushing to beat potential tariffs on Chinese goods that incoming U.S. President Donald Trump may impose.

Amidst trade risks and a slowing economy, China is facing challenges such as reduced consumption and a real estate crisis. The World Bank has raised forecasts for China’s economic growth to 4.9% but warns of ongoing issues like reduced confidence among households and businesses, an aging population, low consumption, and high debt that could continue to impact China’s future growth.

On a brighter note, the non-manufacturing sector, covering construction and services, saw an increase in the parallel purchasing managers’ index to 52.2 points, up from 50 points in November. This suggests some resilience in other sectors of the economy despite the challenges faced in the manufacturing industry.

As China navigates through economic uncertainties and trade tensions, it will be crucial for policymakers to continue implementing measures to support growth and address underlying structural issues that may hinder long-term economic stability.

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