China factory activity reduces for first time in over two years

high-emission vehicles being banned in beijing

China’s factory activity contracted for the first time in more than two years in December, showing the challenges facing Beijing as it looks to end a bruising trade war with Washington and decrease the risk of a sharper economic downturn in next year.

The increasing strain on factories shows a continued loss of momentum in China, adding to concerns about softening global growth, main if the Sino-U.S. dispute drags on.

Trade frictions are already disrupting worldwide supply chains, fuelling concerns of a bigger blow next year to world trade, investment and uncertain financial markets.

The official Purchasing Managers’ Index (PMI) – the first snapshot of China’s economy per month – dropped to 49.4 in December, below the 50-point level that separates growth from contraction, a National Bureau of Statistics (NBS) survey revealed on Monday.

It was the first contraction since July 2016 and the weakest reading since February 2016. Experts had forecast it would dip to 49.9 from 50.0 the earlier month.

China is expected to present more economic support measures in coming months on top of a raft of initiatives this year. A prolonged downturn in the factory sector, key for jobs, would probably spark further attempts to juice domestic demand.

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