China's December factory activity expands at slower pace as trade risks rise

China's manufacturing activity grew for a third straight month in December, but barely, an official survey of factories showed on Tuesday, suggesting the effects of stimulus policies may take longer to provide support as new risks loom. commercials.

The Office of National Statistics Purchasing Managers' Index (PMI) slowed to 50.1 in December from 50.3 in November, staying above the 50 mark that separates growth from contraction, but missing the forecast average of 50.3 in a Reuters poll.

China's $19 trillion economy has struggled to recover from the pandemic amid weak consumption and investment.

However, authorities are hopeful that fiscal and monetary measures unveiled later this year will bring about a turnaround in the housing market, which has affected the broader economy.

Improved domestic demand could benefit manufacturers amid a global economic slowdown, reducing the impact of US President-elect Donald Trump's proposed new tariffs on Chinese goods.

Mixed industrial production and retail sales data for November released earlier this month underscore how difficult it will be for Beijing to mount a lasting economic recovery heading into 2025. Government advisers recommend the economy maintain a growth target of around 5 .0% next year and that authorities will intensify consumer-focused stimulus.

The non-manufacturing PMI, which includes construction and services, rose to 52.2 this month, after slowing to 50.0 in November.

Trump has promised to impose a 10% tariff on Chinese goods to force Beijing to stop trafficking in Chinese-made chemicals used in the production of fentanyl. He also threatened to impose tariffs of more than 60% on Chinese goods during his campaign, posing a significant growth risk for the world's leading exporter of goods.

At an agenda-setting meeting earlier this month, policymakers pledged to increase the budget deficit, issue more debt and ease monetary policy to support economic growth.

The World Bank last week raised its growth forecasts for China for 2024 and 2025, but warned that weak household and business confidence, along with headwinds in the real estate sector, would weigh on economic growth next anus.

Stabilizing the real estate sector, which at its peak in 2021 accounted for around a quarter of the economy and where 70% of household savings are located, is essential for Beijing to revive domestic consumption and improve confidence among consumers. factory owners.

Analysts polled by Reuters forecast the private sector Caixin PMI would be 51.7. The data will be published on Thursday.