China’s manufacturing growth slowed last month for the first time in six months, official figures showed yesterday, suggesting the world’s second-largest economy faced headwinds at the end of last year.
The purchasing managers’ index (PMI) was at 51, down from November’s 51.4, the Chinese National Bureau of Statistics said on its Web site. A reading above 50 signals expansion while a figure below indicates contraction. It marked the 15th straight month of growth but it is the first time the figure has dipped from the previous month since June last year.
“The fall in the weaker-than-expected official PMI reinforces our view that growth momentum entered a downtrend” in the fourth quarter from a peak in the third, Nomura International analysts said in a research note.
British bank HSBC last month said China’s manufacturing activity last month expanded at its slowest rate in three months, in its preliminary PMI index.
The bank’s final PMI reading for last month is scheduled to be released on Tuesday.
China’s economy, an important driver of regional and global growth, expanded 7.8 percent from July to September last year, snapping two quarters of slowing, but analysts warn vulnerabilities remain.
Last month’s PMI indicates “that real activity could have slowed in the month due to continued liquidity tightness,” ANZ bank economists Liu Li-Gang (劉利剛) and Zhou Hao (周浩) wrote in a separate note.
A government report cited by state media last week suggested China’s economy grew 7.6 percent last year, slightly above its official target for the year and just below the 7.7 percent expansion in GDP in 2012 — the worst growth rate for 13 years.
Liu and Zhou maintained their forecast that China’s economic growth may have slowed to as low as 7.5 percent in the fourth quarter while expecting a figure of 7.6 percent for all of last year.
The Nomura analysts — Zhang Zhiwei (張智威), Hua Changchun (花長春) and Wendy Chen (陳家瑤) — expect economic growth to slow to 7.6 percent in the fourth quarter before weakening further to 7.5 percent in the first three months of this year and 7.1 percent in the April-June period.
“We remain concerned about the sustainability of investment by local government financing vehicles and property developers given elevated interest rates,” they added.
China on Monday announced that liabilities carried by local governments ballooned to 17.9 trillion yuan (US$2.95 trillion) as of the end of June last year.
The figure was included in the results of a long-awaited nationwide debt probe by the National Audit Office and compared with 10.7 trillion yuan as of the end of 2010 — an increase of 67 percent.
Local authorities have long used debt to fuel growth in their regions, often by pursuing projects that are not economically viable or sustainable. The burgeoning liabilities at the local level have raised concerns of a potential drag on its economy unless steps are taken to rein them in.