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QINGDAO TODAY
在线翻译:
szdaily -> Business -> 
Caixin PMI shrinks for first time in 19 months
    2019-01-03  08:53    Shenzhen Daily

THE country’s factory activity contracted for the first time in 19 months in December as domestic and export orders continued to weaken, a private survey showed, pointing to a rocky start for the world’s second-largest economy in 2019.

The readings largely dovetailed with an official survey Monday which showed growing strains on China’s manufacturing sector, a key source of jobs.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) for December, released yesterday, fell to 49.7 from 50.2 in November, marking the first contraction since May 2017.

Economists polled previously had forecast only a marginal dip from November to 50.1, just above the neutral 50-mark dividing expansion from contraction on a monthly basis.

New orders — an indicator of future activity — fell for the first time in two and a half years, with companies reporting subdued demand despite some price discounting. New export orders shrank for the ninth month in a row.

While production edged higher after two months of stagnation, factories cut jobs for the 62nd month in a row.

“External demand remained subdued due to the trade frictions between China and the United States, while domestic demand weakened more notably,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group.

“It is looking increasingly likely that the Chinese economy may come under greater downward pressure,” said Zhong.

The Caixin/Markit survey focuses mostly on smaller businesses, which are believed to be more export oriented.

China’s official PMI showed factory activity contracted for the first time in over two years, also pressured by weak demand at home and abroad.

It suggested small and mid-sized firms were seeing a sharper deterioration in business conditions than larger firms, a trend that policymakers have repeatedly tried to address through special loan programs and steps to reduce operating costs.

With business conditions expected to get worse before they get better, China is expected to roll out more support measures in coming months on top of a raft of initiatives in 2018.

The country’s top leaders, at an annual meeting in December, pledged to cut taxes and keep liquidity ample while pushing forward trade talks with the United States.

Domestic demand had already been weakening before the Sino-U.S. trade tensions as a regulatory crackdown on risky lending was pushing up borrowing costs.

To encourage cautious bankers to keep lending to smaller firms, the central bank cut the amount of cash banks have to set aside as reserves four times in 2018. Hefty additional cuts are expected this year, along with steps to make it easier for private companies to raise funds and refinance.

China said the country is still on track to hit its 2018 growth target of around 6.5 percent, down from 6.9 percent in 2017.

(SD-Agencies)

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