• Alexander Liu-Middleton

Government statistics show that China’s factory productivity shrinks for 2nd month in a row

Productivity in China's massive manufacturing segment decreased for the second straight month in January signifying further stresses on the economy that could intensify risks to world-wide growth.

Concern about reduced demand in China is moving through the world's commercial markets and affecting other Asian economies after sales warnings from companies such as heavy machinery producer Caterpillar to iPhone maker Apple.

Despite increasing government exertions to create activity, apprehensions are growing that China may be at risk of a sharper-than-expected slowdown if the trade war with the America fails to get resolved.

The official PMI (Purchasing Managers' Index ) rose slightly up to 49.5 in January from 49.4 in December, but the raise was slight and the reading was still beneath the 50 point-mark that separates growth from reduction on a monthly basis. This was according to data released in a report by the National Bureau of Statistics (NBS) and analysts surveyed by Reuters had conjectured the scale would dip to 49.03.

These outcomes suggest that the Chinese economy crept off to a slow start for the new year as many analysts had projected after GDP progress dropped to a 28-year low last year.

This event could add a sense of urgency to start trade talks, as high-level Chinese and U.S. delegates meet in a crucial effort to strike a deal before an early March deadline that could bring in higher U.S. tariffs.

An analysis of the factory PMI showed that weakness came from declining orders. Producers also continued to cut jobs, a tendency Beijing is carefully watching as its weighs more support measures.

New orders - a gauge of future activity - pointed to further pressure in the coming months. The sub-index has fallen to 49.6 from 49.7 in December, a drop for the second consecutive month.

New export orders decreased for an eighth straight month because of vacillating external demand, though the sub-index ticked up slightly to 46.9 from the previous month's 46.6.

Regardless of weaker orders, the output sub-index crept up to 50.9 from 50.8.

Experienced China watchers characteristically advise taking the data early in the year with a pinch of salt, suspecting the trends may be biased by the timing of the Lunar New Year holidays.

Companies typically scale back operations or close down for long periods around the holidays, which began on Feb. 4 this year. But workers, business owners and labour activists have told Reuters that companies are shutting earlier than usual as the trade war bites.

Bleak data ahead of an annual meeting of parliament in March could raise the possibility that Beijing may speed up or intensify its stimulus efforts in 2019, after a slew of measures last year that analysts said were modest by Chinese standards.

Still, many analysts believe conditions in China are likely to get worse before they get better, as support policies will take time to work their way through the economy.

Some economists believe growth could even dip below 6 percent in the first half -- from 6.4 percent in the fourth quarter -- before typically stabilising later in the year.

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