China’s economic landscape continues to face challenges, with recent data revealing unexpected contractions in manufacturing activity. As the lunar new year holiday approaches, the country’s official purchasing managers’ index dipped to 49.1 in January, signaling a slowdown in momentum.
Key points to note include:
- The National Bureau of Statistics cited the holiday as a significant factor impacting manufacturing activity, as millions of Chinese workers prepare to travel to their hometowns.
- Industrial profits fell by 3.3% over 2024, despite a year-on-year increase of 11% in December among companies with turnovers exceeding Rmb20mn ($2.8mn).
- The recent data highlights the mounting pressures faced by China’s policymakers, from a lingering property slowdown to trade tensions with the US.
In response, Beijing has introduced various measures to kickstart domestic demand and consumption. President Xi Jinping emphasized the need for vigorous efforts to boost domestic demand, and policymakers rolled out a trade-in program for old goods like home appliances. These efforts have shown some positive impact, with household consumption growth increasing to 4.5% in the last quarter of the year.
Looking ahead, China must navigate potential disruptions in trade following Trump’s return to office. With forecasts pointing to weaker export growth and the looming threat of higher tariffs on Chinese goods, the economic outlook remains uncertain.
Amidst these challenges, it is crucial for China to focus on sustaining growth and bolstering consumer confidence. As the global economic landscape evolves, proactive measures and strategic initiatives will be key to steering China’s economy towards a path of sustainable growth and resilience.
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