Chinese manufacturing experiencing a reduced growth rate

Press Release   •   Feb 01, 2013 12:31 GMT

China has reported a small slowdown in manufacturing growth, underlining the challenges its new leaders face in spurring economic growth.

China's Purchasing Managers' Index (PMI), which surveys big firms, fell to 50.4 in January from 50.6 in December.

However, HSBC said its PMI for China, which surveys smaller firms, rose to 52.3 in January, from 51.5.

The PMI is a widely watched barometer of the health of China's economy, with a reading above 50 indicating expansion while anything below points to contraction.

The official reading slipped into negative territory for two months from August when economic growth hit a more than three-year low in the third quarter, before returning to positive territory with 50.2 in October and 50.6 in November.

China's manufacturing sector has been one of the biggest drivers of its growth over the past few decades.

A key role in the sector's success has been played by the availability of a large pool of low-cost labour, which has seen China become the destination of choice for many global firms looking to make goods cheaply.

However, researchers at the International Monetary Fund (IMF) have said that China's pool of low cost labour is likely to decline in the next few years. They added that the core of the working age population, those aged 20-39 years, has already begun to shrink and that China's labour supply will cross a threshold between 2020 and 2025.

China's economy expanded 7.8% last year, its lowest annual figure since 1999, in the face of weakness at home and in key overseas markets.

But it grew 7.9% in the final three months of 2012 from a year earlier as industrial output and retail sales strengthened, snapping seven straight quarters of slowing growth.

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