Manufacturing activity in China contracted in January for the second consecutive month, according to an official indicator published Sunday in the wake of the announcement by the central bank to cut rates to stimulate the economy.
The PMI purchasing managers calculated by the National Bureau of Statistics (NBS) was for the last month to 49.9, against 49.8 in January.
A reading above 50 marks an expansion in manufacturing activity, while an index lower than this threshold indicates a contraction. The January figures represented the first contraction in 27 months.
Lower interest rates
China saw its economic growth slow sharply in 2014 to 7.4% sliding at a given level in nearly a quarter-century, according to government figures.
In an attempt to cope with this slowdown, the Chinese central bank (PBOC) announced on Saturday its declining deposit rates at one year by 25 basis points to 2.5%, and a decrease in the same proportion of its lending rate at one year, to 5.35%.
The Bank had stressed that the level of inflation “historically low” in China partly explained his decision. Inflation in China has slowed sharply in January, dipping below 1% for the first time in more than five years and the awakening of deflationary pressures spectrum.
The latest rate cut by the Chinese central bank was intervened in November for the first time since 2012. The Bank was then reduced its deposit rate by 25 basis points and lending rates at one year by 40 basis points.
Play on consumption
The provisional PMI calculated by HSBC was Friday reported a slight rebound in manufacturing activity in February to 50.1, against 49.7 in January. The final index will be released Monday.
The Chinese authorities are trying to manage the economic slowdown by making household consumption a new growth engine as in the US and Japanese economies,
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