China Focus: China's factory sector shows resilience

China Focus: China's factory sector shows resilience

The fall in the headline PMI from a 47-month high of 52 points in November was driven by a contraction in new orders and slower output growth, according to IHS Markit, which compiles the survey.

China's manufacturing purchasing managers' index (PMI) came in at 51.6 in December, slightly decelerating from 51.8 in November, according to the National Bureau of Statistics (NBS) data released Sunday.

But the overall reading still appeared relatively solid, and marked the 18th straight month that the sector has expanded. Output prices also increased at a slower pace, but inflation has now been recorded in 15 successive months.

The moderate decline in headline PMI was mainly attributable to the lower inventory, while production growth remained solid despite the "unfavorable working day effect", as there were two fewer working days in December 2017 compared with a year ago, said a CICC research report.

A PMI sub-reading for production fell to 54 from 54.3 in November, but was bang in line with the average over the last six months.

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The Caixin survey showed Chinese manufacturers ramped up buying activity at the fastest rate in four months in December to meet higher production needs.

However, Zhong cautioned that "downward pressure" on growth next year will remain due to "tightening monetary policy and strengthening oversight on local government financing". Furthermore, the rate of growth quickened to the sharpest since October 2016.

"The sector therefore is in good shape heading into 2018", he added.

At the annual Central Economic Work Conference (CEWC) chaired by President Xi Jinping, top policymakers pledged to focus on creating "high quality" growth. It also vowed to keep a tighter grip on the money supply in a much more hawkish message than it had at the previous year's meeting.

"Given the strong conditions evident in the manufacturing sector, it is no surprise to see that firms are upbeat about the outlook", Philip O'Sullivan, economist with Investec, said.

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