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Chinese factory activity in February declines for the fifth month, increasing pressure on the economy

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BEIJING (Reuters) – China’s manufacturing activity contracted in February for the fifth consecutive month, an official survey of factories showed on Friday, increasing pressure on policymakers to implement new containment measures. recovery as factory owners struggle to secure orders.

The official Purchasing Managers’ Index (PMI) fell to 49.1 in February from 49.2 in January, below the 50 mark separating growth and contraction and in line with a survey’s median forecast of 49.1 Reuters.

Seasonal factors may have affected this figure, since the Lunar New Year (LNY) fell on February 10 this year and saw factories close as workers returned home for the holidays.

China’s disappointing recovery from COVID-19 has raised doubts about the foundations of its economic model and fueled hopes that policymakers will need to consider bolder reforms to support long-term growth.

The world’s second-largest economy has struggled with below-average growth over the past year, amid a housing crisis and as consumers hold back spending, foreign companies divest, manufacturers struggle to find buyers and local governments face a huge debt burden.

The official non-manufacturing PMI, which includes services and construction, rose to 51.4 from 50.7 in January, marking the highest figure since September last year, thanks to robust activity during the LNY vacation.

Policymakers have pledged to roll out new measures to help support growth after measures implemented since June had only a modest effect.

The People’s Bank of China cut banks’ reserve requirement ratio (RRR) by 50 basis points on Feb. 5, the largest in two years, releasing 1 trillion yuan ($139.03 billion) of liquidity to long term.

Chinese President Xi Jinping on Friday chaired a meeting of a key economic decision-making body aimed at supporting manufacturers by upgrading equipment and reducing logistics costs, as part of his efforts to rebalance the economy in leveraging technology to drive productivity gains and increased revenue.

China will not release its 2024 growth target until next Tuesday, but policymakers expect Beijing to maintain a similar growth target as last year, of around 5 percent.

($1 = 7.1925 Chinese yuan renminbi)

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