Chinese manufacturing fell to a six-month low in January due to declining output and orders. “The economy has lost some momentum,” said Wang Tao, chief economist on China at UBS AG. The reduction of credit is being felt, continued Tao. The manufacturing PMI put out by the National Bureau of Statistics and China Federation of Logistics and Purchasing showed a decline of .5 to 50.5, slightly higher than the HSBC Holdings and Markit Economics PMI index of 49.5. January’s output fell to a four-month low of 53 from 53.9, and new orders declined to a six-month low from 52 to 50.9.
The reduce of growth expansion can be contributed to the Communist Party’s attempt to reign in the large shadow banking industry, which is estimated to be as large as $6 billion. The reduction of easy money is also attempting to put on a bandage of local government balance sheets that have exploded in an attempt to force growth in various provinces.
The data is pointing to a shrinking manufacturing labor force with an index of employment falling to 48.2, the lowest since February 2013. Within the HSBC’s data, layoffs have sped up to the fastest pace since 2008.
Ding Shuang, senior economist on China at Citigroup Inc., said “growth may continue to slow in the next couple of quarters due to generally tighter credit conditions, amid government efforts to contain local government debt and regulate shadow banking.” Analysts expect China’s growth expansion to further contract to levels within a squeeze point for employment, while HSBC’s data suggests that a slowdown in growth is already beginning to start the layoffs.