Weak Manufacturing Sector, Slowing Chinese Economy

Weak Manufacturing Sector, Slowing Chinese Economy
Weak Manufacturing Sector, Slowing Chinese Economy

Weak Manufacturing Sector, Slowing Chinese Economy

Today China came up with the data that its economy grew by a robust 7.7 percent last year; however, it is not even a shadow to what it saw in the 1990s when it was experiencing double digit growth. A major reason behind the fall in the economic growth rate is that its manufacturing sector is not doing well as it slowed for the first time in six months in December.

ForexMinute had earlier reported this month that the slow manufacturing sector has been dragged down by weak demand for Chinese exports. In fact, the state-sponsored PMI fell to 51 in December, down from 51.4 in November. Though the growth rate of 7.7 per cent is one of the strongest performances globally, government is concerned about it.

According to data the Chinese economy is facing huge challenges after receiving double digit growth in the last decade. The government which got signs of a slowdown late in the year as authorities tried to rein in a debt-fuelled investment binge, recently pumped in $50 billion in market hoping that it will give some boost; however, this does not seem to have any impact.

China to Focus on Domestic Consumption as Exports Decline

Nevertheless, China’s economy which has cooled since recording double digit rates of growth in the run-up to the global financial crisis of 2008 is facing huge challenge in exports. In December’s Chinese manufacturing as a whole though grew, the crucial export sector producers saw a contraction last month for the first time since July.


Additionally, as has been reported by ForexMinute earlier, in order to correct the situation amid concern that the debt burden was rising to dangerous levels, the Chinese government tightened credit toward the end of last year. However, it did not seem to have impact as investment growth slowed despite the measure on the part of the government.

After receiving decline in exports, the Chinese government is focusing on the domestic consumption which has been not given much attention so far. The export oriented manufacturing may take a halt now as the Chinese government is mulling plans to come up with policies that won’t rely on investment on units for exports but for domestic consumption.

In effect, the November last year saw a dramatic event when President Xi Jinping announced a broad agenda for reform. The reforms according to the government are meant to tackle the imbalances in exports and local consumption, sustainable development, etc.
To contact the reporter of this story: Jonathan Millet at john@forexminute.com