– Happy new year? –
China’s leaders are trying to pull off a managed slowdown of the economy to make expansion more sustainable and led by consumer spending, as in other major economies.
The growth slowdown in China last year – gross domestic product rose an annual 7.4 percent in 2014, a 24-year low – prompted some intervention by authorities.
The People’s Bank of China (PBoC), the central bank, cut the percentage of funds banks must hold in reserve across-the-board earlier this month, seen as a way to free up more cash for lending and stimulate growth.
That move followed the PBoC’s decision in November to cut benchmark interest rates for the first time in more than two years.
Julian Evans-Pritchard, China economist at Capital Economics, urged “a degree of caution” on the PMI result given that the shifting timing of the New Year holiday can render “seasonal adjustments less accurate at this time”.
“The holiday often results in a rush to stock up on inputs and complete existing orders before workers return home, while also resulting in longer delivery times,” he wrote in an analysis.
“Either way, domestic demand appears to have held up better than foreign demand –- the new export orders component fell sharply to a 20-month low.”
Nomura economists, meanwhile, also emphasised the impact of companies replenishing stocks as the main driver in the rebound.
“The sustainability of this restocking remains in question,” they wrote.
US Federal Reserve Chair Janet Yellen said Tuesday that weakness in China as well as Europe continue to pose risks for the US economy, saying that China’s growth could slow more than Beijing’s leaders currently expect.
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