China's manufacturing PMI drops to six month low

China's purchasing managers' index (PMI) for the manufacturing sector dropped to a six-month low of 50.5 per cent in January, official data here said.

Extending its decline from December, the last month's index indicated the lowest factory activity since August while marking the 16th straight month above the boom-bust line, the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing said in a joint statement today.

In January, the sub-index for production stood at 53.0 percent, down 0.9 percentage points from December but still 0.2 percentage points higher than last year's average.

The sub-index for new orders lost 1.1 percentage points to 50.9 per cent, it said.

The sub-index for purchase quantity moved down 1.7 percentage points to 51 per cent in January, while the sub- index for new export orders stood at 49.3 percent, down 0.5 percentage points from December.

A PMI reading below 50 indicates contraction, while one above 50 signals expansion.

All major PMI indexes declined in January, indicating downward pressure on the economy, but in general, the country's economy is still expecting stable growth, Zhang Liqun, an analyst with the Development Research Centre of the State Council told state run Xinhua news agency.

Falling new orders showed the growing impact of market demand restraints, with expectations of enterprise competition and restructuring in the future, Zhang said.

Qu Hongbin, chief China economist with HSBC, described the dynamic as "a soft start to China's manufacturing sectors in 2014, partly due to weaker new export orders and slower domestic business activities during January.

"Factory activities in January were mainly dragged down by accelerating overcapacity easing and a cut in production ahead of China's lunar new year, Zhao Qinghe, a senior analyst with NBS said.

Zhao expects an improving business environment for manufacturers and more robust play of market forces as China continues to push new reforms to restructure its economy.

The government has yet to announce its 2014 growth target, which analysts widely expect to be set at 7- 7.5 per cent.

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