Chinese New Year fails to stimulate factory output, official data shows

Chinese New Year fails to stimulate factory output, official data shows

HONG KONG — An expected spike in China’s factory production in January in the buildup to a late Chinese New Year failed to materialize, with the official purchasing manager’s index (PMI) falling to a level not seen since 2012.

China’s National Bureau of Statistics released the factory output data that showed manufacturing activity in the country had fallen to 49.8 in January, edging below the 50-point level that separates growth from contraction.

The PMI fell from 50.1 in December, but was expected to improve as shippers get their orders in early to beat factory shutdowns during Chinese New Year, the country’s biggest holiday, that falls on Feb. 19 this year. Although the holiday is only three days, many factories are closed for three weeks as migrant laborers head back to their home provinces.

HSBC released its own flash PMI that also delivered a reading of 49.8, compared with 49.6 in December.

China’s manufacturing slowdown can be seen in its exports that grew only 6.1 percent in 2014, the slowest growth rate since it joined the WTO in 2001, with the exception of 2009 (the global financial crisis), according to a note to customers by Barclays.

The bank said China’s slowing growth compared with manufactured goods export growth of more 11-18 percent year-over-year for Vietnam, Myanmar, the Philippines, and Sri Lanka in 2014.

“The dispersion of low-end manufacturing out of China is re-shaping trade routes in Asia and is driven by Chinese manufacturing wage rates that are nearly double that of other emerging Asia countries, given the renminbi’s average 10 percent appreciation against competing Asian exporters in the past two years,” the Barclays note said.

Shipping line executives told recently that China’s slowdown was not expected to hurt their container volumes, a position supported by analyst predictions of throughput growth on important routes, such as Asia-U.S and Asia-Europe.

JOC Economist Mario Moreno expects total U.S. import volume in 2015 to increase 6.8 percent to 20.2 million TEUs compared to 2014. Drewry Maritime Research is predicting container shipping volumes will grow 5.5 percent across major trade lanes in 2015, except Asia-Europe that will see growth of 3.5 percent, while Clarkson Research Services expects global container trade to increase 6.7 percent this year, with a 7 percent year-over-year growth in Asia-Europe.

The consensus is that exports from China will continue to post increases, but its future will increasingly be tied to other emerging Asian economies, Barclays noted.

“In our view, export-led economic development in emerging Asian economies is a necessary step for China to maintain even modest 5-10 percent export growth for the rest of the decade. Furthermore, the collapses in oil and other commodity prices are likely to impair demand for Chinese exports to commodity-centric economies, which accounted for 21 percent of total Chinese exports in 2014,” the bank report stated.

“If we exclude the more developed North Asian economies, China’s exports to the rest of Asia grew from 14 percent of total exports in 2007 to 26 percent in 2014, on our estimates, and will be critical demand drivers in 2015.”

Barclays said the changing regional trade patterns posed a key risk to Chinese port operators, while ASEAN ports were well placed to capture the structural shift as Chinese manufacturers relocated factories to Southeast Asia.

Contact Greg Knowler at and follow him on Twitter: @greg_knowler.