China Dec factory growth eases as tough pollution measures bite

FE Team | Published: December 31, 2017 20:49:08

BEIJING, Dec 31 (Reuters): Growth in China's manufacturing sector slowed slightly in December as a punishing crackdown on air pollution and a cooling property market start to weigh on the world's second-largest economy.
The data support the view that the economy is beginning to gradually lose steam after growing by a forecast-beating 6.9 per cent in the first nine months of the year, but the findings did not appear to suggest a risk of sharper slowdown at this point.
The official Purchasing Managers' Index (PMI) released on Sunday dipped to 51.6 in December, down from 51.8 in November and in line with forecasts from economists in a Reuters poll.
But the overall reading still appeared relatively solid, and marked the 18th straight month that the sector has expanded. The 50-point level divides growth from contraction on a monthly basis.
The figures showed that China's full-year 2017 economic growth would be at about 6.9 per cent and around 6.5 per cent for 2018, according to the China Federation of Logistics and Purchasing, which compiles the data.
Both predictions would be slightly stronger than those in a Reuters poll. "Overall, 2017's economic performance continues to be steady and good, establishing a generally good foundation for 2018," the federation said.
"Recent PMI surveys show companies are confident for economic development in the new year, with production and operating activity expectation indices showing significant improvement."
Boosted by hefty government infrastructure spending, a resilient property market and unexpected strength in exports, China's manufacturing and industrial firms have been a major driver behind solid economic growth this year, with their strong appetite for raw materials boosting global commodity prices.
However, a slowdown has started to take hold in the last few months due to a wide-ranging combination of government measures, from a crackdown on smog in heavily industrialised northern provinces to continued curbs on the housing market which are weighing on property investment.
Chinese steelmakers in 28 cities have been ordered to curb output between mid-November and mid-March, while a campaign to promote cleaner energy by converting coal to natural gas has also hampered manufacturing activity in some cities, leading to shortages and sending prices spiking.
Still, there are signs that steel mills, smelters and plants in parts of the country with fewer restrictions have ramped up production to win more market share, largely offsetting the "rustbelt" declines on a nation-wide basis.
A PMI sub-reading for production fell to 54 from 54.3 in November, but was bang in line with the average over the last six months.
Total new orders also dipped in December, to 53.4 from 53.6, but export orders grew at the fastest pace in six months, pointing to sustained strength in global demand heading into the new year and helping boost business optimism to the highest since September.