China manufacturing dips amid seasonal slowdown

Bloomberg and Reuters

China's manufacturing sector expanded at a slower pace in January as a seasonal slowdown, Covid-19 outbreaks and a housing market drop dragged activity at small firms to the weakest since the depth of the pandemic.

The official manufacturing purchasing managers' index declined to 50.1, the National Bureau of Statistics said yesterday, just above the median estimate of 50.

The non-manufacturing gauge, which measures activity in the construction and services sectors, fell to 51.1, also marginally above the consensus forecast.

The PMI gauge of small companies dropped to 46 this month, the lowest since February 2020 and taking a contracting streak to a ninth month while the indicator of large companies rose to 51.6, the highest in six months.

However, the Caixin Manufacturing Purchasing Managers' Index, also released yesterday, fell to 49.1, the worst in almost two years. The private survey focuses on smaller, export-oriented firms compared with the official manufacturing PMI.

The manufacturing sector had a slower pace as Chinese factories often see a production lull in January and February as workers head home for the Lunar New Year holidays, together with home sales falling. Manufacturers were also squeezed by higher costs, with input prices rising at the fastest rate in three months, according to the official data.

The contraction resulted from the consumption sluggish as well, due to tightened restrictions to contain the spread of the highly-contagious omicron virus variant. Residents in places where there have been recent Covid-19 outbreaks have been urged to not leave the cities unless necessary.

To spur growth, the central bank has cut key interest rates, lowered reserve requirements for lenders and vowed to open its toolbox wider.

Meanwhile, China will toughen law enforcement to curb monopoly practices and unfair competition in the pharmaceutical industry as the government seeks to foster a good business environment, the industry ministry said yesterday.

In a statement, the ministry of industry and information technology said it would "strengthen law enforcement against unfair competition, and resolutely investigate unfair competitive acts, such as commercial bribery".