CHINA TOPIX

11/02/2024 02:25:42 pm

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China's Factory Activity in February Contracts at Fastest Rate in Four Years

China Economy

(Photo : Getty Images) Last year services and consumption accounted for 4.6 percentage points of China's overall growth, up from 3.7 in 2014.

China's official Purchasing Managers' Index (PMI), which tracks activities in state owned and large factories, shrank to 49.0 in February, data from the National Bureau of Statistics (NBS) revealed.

This is fastest rate of contraction in factory activities since November 2011, in what looks like a fresh sign of sluggishness in world's second largest economy.               

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On other hand, Caixin manufacturing PMI, which takes into consideration the activities of factories in small and medium sized plants, also shrank to  48.0 - its lowest in 5 months.      

Economists consider it a sign of economic expansion when the PMI is above 50, while economy is seen as contracting when the PMI slides below 50.

However, many economic experts are still not reading too much into fresh PMI figures. They argue that low the PMI figures are partly due to seasonal holidays last month. Most of the factories in China were closed for a week in February to celebrate the Chinese New Year. Economists will look into March figures more discreetly to get a precise picture of production in China's factories.

The fresh PMI figures came shortly after China's Central Bank cut the Reserve Requirement Ratio (RRR) by 50 basis points in a bid to spur demand in the country's slowing economy.      

China is currently coping with its worst economic downturn in two decades. China's GDP grew by 6.9% in 2015, the lowest GDP growth rate in 25 years, while other important economic indicators have been contracting since last year.

China's Yuan has witnessed continuous devaluation since last year, while the country's foreign exchange reserves have plummeted by $762 billion to 3.23 trillion.

The ongoing economic downturn has had a traumatic effect on Chinese stock market, which has been witnessing continuous bloodbath since June last year -  leading to the dismissal of China Securities Regulatory Commission chief Xiao Gang. 

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