BEIJING, Dec 31 (Reuters) – China’s manufacturing activity unexpectedly rose in December, ending eight straight months of declines and giving policymakers some confidence as they race to hit this year’s economic growth target.
A survey by the National Bureau of Statistics on Wednesday showed that the manufacturing purchasing managers’ index (PMI) rose to 50.1 in December from 49.2 in November, above the 50-point dividing line between boom and bust. A Reuters poll showed the number exceeded analysts’ forecast of 49.2.
The data should give policymakers some optimism after opting not to take significant additional stimulus this year to meet the full-year growth target of around 5%.
After last month’s export data beat expectations, the new orders and new export orders sub-indexes rose to 50.8 from 49.2 in November and to 49.0 from 47.6 respectively.
The non-manufacturing PMI, which includes services and construction, was 50.2, shrinking for the first time in nearly three years in November.
Another data released last week showed that profits of Chinese industrial companies fell 13.1% year-on-year in November, the largest decline in more than a year, as sluggish global demand put pressure on the export-oriented economy.
At an agenda-setting meeting in early December, the Communist Party leadership pledged to increase incomes and stimulate consumption, although similar promises in the past have struggled to bear fruit.
So far, Chinese consumers have been reluctant to spend due to uncertain job prospects and a protracted housing crisis that has depleted household wealth.
As tensions with key export markets mount, policymakers in Beijing have recognized the need to rebalance the economy and shift its production-driven model.
The report of the Central Economic Work Conference stated that “my country’s economic development still faces many old problems and new challenges. The impact of changes in the external environment has deepened, and the contradiction between strong domestic supply and weak demand is prominent.”
In an article published in mid-December in Qiushi, the party’s flagship magazine, President Xi Jinping said there was “general excess production capacity,” meaning “final consumption is a sustainable driver of economic growth.”
Beijing has previously denied criticism of “overcapacity” from Western governments as unfair.
The authorities have also vowed this year to crack down on price wars, cut production in certain industries and step up so-called “anti-involution” efforts.