China's manufacturing sector shrinks for fifth month in a row, survey reveals

01 March 2024 , 15:03

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Workers labor at a factory of coolant radiators for air conditioners in Yuexi county in central China's Anhui province. Manufacturing in China contracted for a fifth consecutive month in February, according to an official survey of factory managers (Image: Chinatopix)

China's manufacturing activity has shrunk for the fifth month in a row, despite efforts to support it, according to an official survey of factory bosses released on Friday.

This shows that the economy is still weak before the annual legistlative meetings where officials are expected to renew efforts to support it. The official purchasing managers index, or PMI, dropped to 49. 1 in February from 49.2 the month before. The PMI is a scale up to 100 where 50 is the line between growth and shrinkage.

The manufacturing PMI has gone down in ten of the last eleven months, only going up in September. This comes even though Beijing has recently taken steps to boost the economy, like lowering a lending rate that sets home loans and reducing banks' reserve requirements to increase lending.

A different survey by financial news outlet Caixin found that manufacturing PMI went up slightly from 50. 8 to 50.9. "We think it makes sense to average across both PMIs to gauge conditions in industry," said Huang Zichun from Capital Economics.

"On this basis, the headline manufacturing reading stayed the same at 50.0 and matches with factory activity staying steady last month," she said. As this year's Lunar New Year holidays - a weeklong national holiday - also fall in February, the readings could also be skewed by this period as factories are typically inactive.

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Meanwhile, the non-manufacturing PMI, which measures activity in sectors like services and construction, went up to 51. 4 from 50. 7 in January. This is the highest it's been since September last year, probably because of the increase in spending during the Lunar New Year holidays.

Beijing is likely to focus on financial measures to help the economy at the upcoming National People's Congress (NPC) meetings starting on March 5. They want to boost spending, investment and make people more confident in its stock market.

After a quick boost in the economy after COVID-19, the world's second-biggest economy has been dealing with an uneven recovery because of a property crisis and a slowing economy. China is also expected to announce its annual GDP growth target at the NPC.

Lawrence Matheson