China's industry is shrinking even faster than feared
The weak global economy, a real estate crisis and falling prices are threatening China's industry. Politicians must act now, demands one economist. Otherwise, several negative trends could intensify into a "vicious circle".
Manufacturing activity in China shrank for the third month in a row in December. This is according to an official survey of factory owners who are struggling with weak demand. The official Purchasing Managers' Index (PMI) fell to 49.0 in December from 49.4 in the previous month, according to the National Bureau of Statistics. The barometer thus once again remained below the growth threshold, which is 50. It was also weaker than expected, with a Reuters poll putting the median at 49.5.
"We need to strengthen policy support, otherwise the trend of weak growth will continue," said Nie Wen, economist at Hwabao Trust. Nie expects the central bank to cut interest rates and banks' reserve requirement ratios in the coming weeks. "The fall in prices has severely affected corporate profits and further worsened people's employment and income. We could experience a vicious circle."
Official growth target remains at five percent
The People's Republic is struggling with an ongoing real estate crisis, and the slowdown in global growth poses additional challenges for the government in Beijing. On December 22, five of the largest Chinese state banks lowered interest rates for certain deposits, the third round of interest rate cuts this year. The Chinese central bank declared on Thursday that it would adjust its policy more strongly in order to support the economy and promote a recovery in prices.
Earlier this month, Chinese leaders announced further steps to support the economy next year. The government has taken a series of measures in recent months to support the post-pandemic recovery. The official non-manufacturing Purchasing Managers' Index (PMI), which includes services and construction, rose from 50.2 in November to 50.4. China's economic growth is expected to reach the official target of around five percent this year.
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The weak economic situation has caused a significant decrease in China's Purchasing Managers' Index, indicating a continued contraction in China's manufacturing industry. This downturn could have severe consequences for the broader industry in China, according to economists. For instance, Nie Wen, an economist from Hwabao Trust, has warned that the fall in prices and weak demand could lead to a "vicious circle" of declining corporate profits, reduced employment, and worsening income levels. This economic predicament comes at a time when China is grappling with a real estate crisis and facing challenges from the slowdown in global growth.
Source: www.ntv.de
