China Factories Remain in Contraction

China’s manufacturing activity picked up pace in January, but remained in contraction, a private survey showed on Friday.  The flash HSBC Purchasing Managers’ Index (PMI) came in at 49.8, after registering a 49.6 final reading in December, its first contraction in seven months. The 50-point mark separates growth from contraction.

“We’re not out of the woods yet, still continuing to see contraction in China,” said Frederic Neumann, co-head of Asian economics research at HSBC.

“It’s not the export sector that is problematic, it is the domestic sector. There are still reports of insufficient credit to small and medium enterprises which is supposed to help stabilize manufacturing. Stay tuned for more news from PBOC, they may have some surprise announcement on Friday when we are all going home. Expect two more rate cuts and three more RRR cuts,” he said.


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