Business

China factory activity shrinks for first time in months

A Chinese worker pushes a cart full of clay in Dehua, Fujian Province, China. Image copyright Getty Images
Image caption Activity in China's factories contracts for the first time since May this year

China's manufacturing activity shrank for the first time in seven months in December, a private survey showed on Wednesday.

The final HSBC/Markit Purchasing Managers' Index (PMI) was at 49.6, just below the 50 level that separates growth from contraction in the sector.

The reading was slightly higher than an initial "flash" number of 49.5 released earlier this month.

But, the result was still down from a final reading of 50 in November.

The most recent data paints an even weaker picture of the slowing Chinese economy, which has been heralded as the "factory of the world".

New factory orders contracted for the first time since April.

The economic data also backs the series of surprising moves by its government to boost growth in the past two months.

In November, the country's central bank unexpectedly cut interest rates to 2.75% for first time since 2012 in an attempt to revive the economy.

Whether the world's second biggest economy will be able to reach its growth target of 7.5% after not missing the mark for 15 years has economists questioning if more needs to be done by policymakers.

'Not a surprise'

While the downbeat data is not a surprise considering the preliminary reading released earlier this month, Ryan Huang, market strategist at broker IG Asia said it just adds more pressure on Beijing to introduce more measures.

"There's still bit of way to go before we see the Chinese economy reviving," he told the BBC. "They [the central bank] have been doing [banks'] reserve requirement ratio cuts, loan to deposit ratios have been lowered to help lending conditions - we'll probably see more of this happening."

Meanwhile, investors shrugged off the latest economic data with Chinese markets trading higher after the news.

The benchmark Shanghai Composite was up 0.8% to 3,192.37 points, while in Hong Kong, the Hang Seng index was higher 0.2% to 23,536.45.

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