World Economy

China Factory Gauge Fall Indicates Need for Support

China Factory Gauge Fall Indicates Need for Support China Factory Gauge Fall Indicates Need for Support

A Chinese factory gauge sank to a seven-month low in December, holding near a preliminary reading and putting pressure on policy makers to provide more support for the world’s second-largest economy.

The final reading of the Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was 49.6 this month from 50 in November, compared with the Dec. 16 reading of 49.5. Numbers below 50 indicate contraction. The median estimate of eight analysts in a Bloomberg survey was for 49.5.

Mired in industrial overcapacity, factory-gate deflation and a housing slump, China is headed for its slowest full-year economic expansion since 1990. The central bank, which cut its benchmark interest rate in November, has expanded its toolkit to support growth, freeing up more funds for lenders in 2015 by broadening the definition of a deposit and adding liquidity by stealth at least four times in the past four months.

The HSBC and Markit PMI are typically based on responses to surveys sent to purchasing managers at more than 420 companies.

 Faster Drop

Falls in China’s housing prices accelerated in December, a survey showed Wednesday as oversupply continued to weigh on the market and developers offered discounts to shore up their balance sheets towards the year-end, AFP said.

The average price of a new home in China’s 100 major cities was 10,542 yuan ($1,700) per square meter this month, down 0.44 percent from November, the independent China Index Academy  said in a statement.

The decrease was faster than November’s 0.38 percent fall and marked the eighth straight month that prices have dropped, according to academy data.

On a year-on-year basis, prices fell 2.69 percent in December, greater than the 1.57 percent recorded last month, the statement said.

“Pressured by their annual sales targets and the need for liquidity generation, property companies continued to take the low-price strategy to promote sales, leading prices in the 100 cities to continue to fall,” said the statement.

“Looking into 2015, the national market will still be under high inventory pressures... and downside pressures remain on house prices,” it added.

The average price in the top 10 cities also fell for the first time in 26 months to 18,878 yuan per square meter, down 0.61 percent from a year ago, the statement said.

Beijing, Shanghai and the southern boom town of Shenzhen bordering Hong Kong were the only three top 10 cities to see annual price rises, it said, with Shanghai the best performer with a 2.46 percent increase to 32,029 yuan per square meter.