On May 28, 2019, employees work on a production line manufacturing lithium battery products at a factory in Yichang, Hubei province, China. BEIJING, January 30 Reuters -- Growth in China slowed in January due to the resurgence of COVID 19 cases and tough lockdowns hitting production and demand, but the slight expansion gave some signs of resilience as the world's second largest economy enters a likely bumpy new year.
The official manufacturing manager's index PMI was up to 50.1 in January, remaining above the 50 point mark that separates growth from contraction but has fallen from 50.3 in December, according to data from the National Bureau of Statistics NBS on Sunday.
The official results contrasted with those in a private survey of mostly small manufacturers in coastal regions, which showed activity fell at the fastest rate in 23 months.
China's economy started last year strong after a severe pandemic-induced slump, but began losing momentum in the summer, weighed down by debt problems in the property market and strict anti-virus measures that hit consumer confidence and spending.
There have been rising raw material costs and soft demand that have eroded corporate profit margins. In December, profits at industrial firms increased at their slowest pace for more than a year and a half.
With the real estate slump predicted to drag on for at least the first half of this year and the emergence of more infectious COVID- 19 variants, China's central bank has started cutting interest rates and pumping more cash into the financial system to lower borrowing costs. In the coming weeks, there are more modest easing steps.
Stability will be the top priority ahead of a once-in-five-years Communist Party congress this year, with policymakers looking to ward off a slowerdown that could undermine job creation.
As other central banks like the U.S. Federal Reserve are about to raise interest rates, which could cause capital outflows from emerging markets, such as China, to be hampered by such easing.
The International Monetary Fund cut its China 2022 growth forecast to 4.8%, from 5.6% previously, reflecting the property woes and the hit to consumption from strict COVID 19 curbs.
According to the chief economist at Pinpoint Asset Management, Zhang Zhiwei said industrial activity slowed due to weak domestic demand. The service sector is also adversely affected by the outbreaks in many cities. The PMI shows that the policy easing measures from the government have not yet been passed to the real economy. We expect the government to increase policy support in the coming months, particularly through more fiscal spending. A sub-index in the PMI for production was at 50.9, down from 51.4 in December, while new orders fell to 49.3 from 49.7.
Since December, a surge in infections in the manufacturing hub of Xian forced many auto and chip makers to shut down operations, while China's new COVID 19 cases have been low compared with many other countries. Production has returned to normal as the city emerged from a lock-in.
KS temporarily adjusted its operations at its Xian manufacturing facilities for NAND flash memory chips last month, but it said on Wednesday that production has returned to normal.
The Tianjin output was also affected by an outbreak of the highly transmissible Omicron variant.
The government is trying to limit industrial air pollution levels ahead of the Beijing Winter Olympics, starting on Friday. China has told steel mills in northern regions to cut production until mid-March.
In January, a survey on China's sprawling services sector showed growth slowed due to the fact that consumer sentiment was being negatively affected by the virus containment measures.
In January, China's official composite PMI, which combined manufacturing and services, stood at 50.1 compared to 52.2 in December.
China's economy grew by 4.0% in the fourth quarter from a year ago, its weakest expansion in one and a half years.