China factory activity decline deepens in December

China's factory activity decline deepened in December, marking the third consecutive month of contraction, according to official data released by the National Bureau of Statistics (NBS). The official manufacturing purchasing managers' index (PMI), a crucial measure of factory output, stood at 49.0 in December, below the 50-point mark that separates expansion from contraction. This reading signaled a further decline from November's figure of 49.4. The NBS noted that in December, "the level of vitality in the manufacturing sector somewhat declined." China began easing its strict COVID-19 restrictions in December 2022, allowing for an economic rebound. However, the recovery has faced challenges due to weak consumer and business confidence, a housing crisis, record youth unemployment, and a global economic slowdown affecting demand for Chinese goods.

Despite Beijing's efforts to boost economic activity through targeted measures and a significant issuance of sovereign bonds to support infrastructure spending, the results have been mixed. The PMI has only entered positive territory once in the past nine months. While there have been signs of economic life, such as better-than-expected growth of 4.9% in the third quarter, China still faces difficulties in achieving its annual growth target of around five percent, which is already the lowest target in years.

The economic challenges in China have been further exacerbated by the country's property market issues, high debt levels, and a slowdown in the real estate sector. These factors, combined with the ongoing global economic uncertainties, have contributed to the continued contraction in manufacturing activity. Beijing is expected to continue its efforts to stabilize and stimulate the economy, but the effectiveness of these measures remains uncertain amid the complex economic landscape.