China’s manufacturing sector is expected to contract for the third consecutive month, reflecting subdued demand for manufactured goods and increasing calls for additional policy support, according to a Reuters poll. The median forecast of 24 economists suggests that the official purchasing managers’ index (PMI) for December is expected to be 49.5, a marginal increase from November’s 49.4. Only three out of the 24 economists surveyed anticipate an expansion in factory activity in December, with the highest forecast reading at 50.5, highlighting the prevailing headwinds. The official manufacturing figures for December are scheduled for release on Sunday, providing a comprehensive overview of the sector’s performance. Additionally, the private Caixin factory survey, expected on Tuesday, is projected to show a slowdown to 50.4 from an unexpected expansion reading of 50.7 in November.
The continuous contraction signals the challenges faced by the world’s second-largest economy, dealing with a feeble post-pandemic recovery, a property crisis, local government debt risks, and sluggish global growth. In response to these economic challenges, the Chinese government has introduced a series of measures to bolster growth. Despite the central bank’s efforts to maintain an accommodative policy to boost confidence and stimulate recovery, new bank lending in China saw a less-than-expected increase in November. Moody’s, the credit rating agency, issued a downgrade warning in December, adding to China’s economic concerns. This warning comes as the property market exerts pressure on the economy, compounding existing challenges. In a parallel development, an interim report on China’s 14th five-year plan, published by parliament, emphasized the country’s commitment to expanding domestic demand, ensuring a swift economic recovery, and promoting stable growth.
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