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China’s February factory activity likely shrank amid holidays

BEIJING (CNA) – China’s factory activity likely contracted in February on slower production after the Chinese New Year holiday and Winter Olympics, with Beijing expected to unveil more stimulus measures at a Parliamentary meeting later this week to support the economy.

The official manufacturing Purchasing Manager’s Index (PMI) is expected to ease to 49.9 in February, its lowest reading in four months, from 50.1 in January, according to the median forecast of 35 economists polled by a news agency yesterday. A reading below the 50-point mark indicates a contraction from the previous month.

“Apart from seasonality impact from Lunar New Year timing shifts, production curbs during the Winter Olympics and still-subdued property sector activity likely weighed on upstream demand,” analysts at Morgan Stanley said in a note last Friday. They expect National Bureau of Statistics manufacturing PMI to have slipped to 49.6.

The week-long Chinese New Year holidays began at the end of January and the Beijing Winter Olympics took place from February 4 to 20.

However, Capital Economics expects some upside surprise to the data, citing loosened COVID-19 restrictions as outbreaks were contained.

Employees working on the production line at a Schneider Electric factory in Beijing. PHOTO: CNA

“Early indicators suggest that conditions improved in February. Most localised restrictions on industrial areas and port cities were lifted thanks to fewer outbreaks this month compared to January.”

China’s economy started last year on a strong footing, rebounding from a pandemic-induced slump the previous year.

Momentum started to flag in the summer, however, weighed down by debt problems in the property market and strict anti-virus measures that hit consumer confidence and spending.

Policymakers have vowed to stabilise growth this year and all eyes are on the annual meeting of its top legislative body that begins on March 5 during which the government will unveil economic targets for the year and likely more stimulus measures.

New bank lending hit a record high in January, latest data showed, after the central bank lowered benchmark lending rates to jump-start the economy. The official PMI, which largely focusses on big and state-owned firms, and its sister survey for the services sector, will be released soon.