China’s factory activity slowed in December, official and private manufacturing surveys showed, reinforcing views that growth in the world’s second-largest economy moderated in the final quarter of 2013.
The final HSBC/Markit manufacturing Purchasing Managers’ Index (PMI) slipped to a three-month low of 50.5 in December from 50.8 in November. Thursday’s reading was unchanged from a preliminary figure issued last month.
The private survey was consistent with the government’s PMI, which on Wednesday dipped to a four-month low 51.0. Both measures remained above the 50 point level that separates expansion from contraction.
“The economy is still growing, no doubt, but the growth momentum has weakened,” said Yao Wei, economist at Societe Generale in Hong Kong.
“The major factors that had helped drive the strong recovery in Q3 and the first half of Q4, such as restocking and property construction, has somewhat softened towards the end of the year,” she added.
Beijing has said it will accept slower growth as it tries to reshape the economy towards more sustainable growth, based on consumer demand, after three decades of breakneck expansion led by exports and credit.
Top leaders have pledged reasonable growth in 2014, and sources at top government think tanks told Reuters they expect a growth target of 7.5 percent, the same as for 2013.
The HSBC/Markit PMI is more weighted towards smaller and private companies than the official one, which contains more large and state-owned firms.
EXPORT ORDERS DRAG
In the HSBC/Markit PMI, a sub-index measuring new export orders touched a four-month low of 49.1, the first time since August that it dropped below 50 points. Similarly, the official PMI showed new export orders contracting for the first time since July, suggesting unsteady external demand.
The private PMI’s sub-index of overall output eased in December from November’s eight-month high, showing that domestic demand is not strong enough to offset shrinking external orders.
A sub-index measuring quantity of purchases also dipped to a three-month low, indicating less appetite to build up stocks.
Tight credit conditions are seen as another reason behind the slower economic growth. Last month money market rates rose to their highest since a cash crunch in June, and rates are expected to remain elevated as the lunar new year approaches.
“We think this is a major factor entering 2014 which is going to affect the growth negatively, and the impact will be profound in the short term,” Yao Wei at Societe Generale said.
Some officials and bankers have said borrowing costs are set to rise in the longer term as Beijing cracks down on unofficial lending and moves towards a market-based interest-rate regime.
(Editing by John Mair)