In December last year, China's manufacturing activity contracted for a fifth straight month. Analysts consider that the government needs to step up stimulus packages and policy support in order to avoid a sharper slowdown.
China's economy grows at its slowest pace in 25 years despite the fact that the services sector ended on a strong note in the year 2015. This raises the demand for the government to come with a policy of easing steps. The Chinese economic authorities have actually come with such policies in the past year or so, including repeated interest rate cuts, according to a report published in the First Post.
China is the world's second-largest economy and a slowdown could highly affect the global market. In the year 2016, China faces persistent risks this year. In order to reduce high debt levels and excess factory capacity the Chinese leaders have pledged to push the "supply-side reform".
In line with expectations of economists, in December China's official manufacturing Purchasing Managers' Index (PMI) registered 49.7, according to Reuters. The number has been up only with a small fraction from November. According to experts, a PMI reading below 50 suggests a contraction in manufacturing activity. However, a reason for optimism is the fact that the Chinese housing market never imploded, but rather went through a controlled demolition, according to Forbes.
The manufacturing PMI number suggests that China's economic growth momentum "is still facing strong headwinds", according to China economist at Commerzbank in Singapore, Zhou Hao, cited by the First Post. China's factories are affected by weak demand from at home and abroad. The fiscal policy will be more proactive and the monetary policy will remain accommodative, according to Zhou Hao.
In the year 2015, China's economic growth has slowed down from 7.3 percent in 2014 to 6.9 percent. China's central bank declared that in 2016 the economic growth could drop further to 6.8 percent. In 2016 it could also prove tougher to make easy money in the tech sector as companies face higher expectations from investors, according to The Wall Street Journal.
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