China Focus: China's factory sector shows resilience

Operating conditions for manufacturing best in 5 years during December: Nikkei PMI

China Focus: China's factory sector shows resilience

The manufacturing sector grew in December, setting a new record as business conditions improved at a record pace, a new survey showed.

The Purchasing Managers' Index, or PMI, rose to 59.8 in December from 58.7 in November.

This is for the fifth consecutive month that the index has come in above 50-point mark that separates expansion from contraction.

The nonmanufacturing index reading has remained above 54 in 2017 except in August.

"The goods-producing economy carries strong momentum into 2018, with new order growth at its highest for nearly eight years and rising backlogs of work pointing to the need for further expansion in capacity", Smith added.

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"Strong business performance was underpinned by the fastest expansions in output and new orders since December 2012 and October 2016 respectively", said Aashna Dodhia, an economist at IHS Markit and author of the report.

The pickup in December's manufacturing PMI came on the back of strong demand both at home and overseas.

Analysts also expect that manufacturing growth will also be affected in the coming months by restrictions on factory production in some areas and especially in heavy industries to reduce pollution.

Finally, the Future Output Index signalled the strongest level of confidence in three months, with more than one-in-five survey participants forecasting higher production.

China's GDP, a measure of economic growth, rose by 6.8% year-on-year from July to September, slowing from a 6.9% pace in the first and second quarters.

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The latest economic growth rate is a tick lower than the 6.9 percent growth in the previous three-month period.

"Economic growth in 2017 is expected to be higher than previous year, but it may come under downward pressure in 2018", Zhong added.

"A lingering concern is that supply-side constraints pose a risk to the sector's ability to kick on", Smith said, adding that huge delivery delays would inevitably be borne out by sustained upward pressure on input costs.

"For the most part, the manufacturing sector remained stable in November, although some signs of weakness emerged", said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin.

The Caixin manufacturing PMI for December compares with a decrease in the official PMI released by the National Bureau of Statistics (NBS) on Sunday.

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