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China’s economy begins the year with an unexpected slowdown. Despite stimulus measures to combat a contracting sector, the country is facing a fresh setback in 2025. Factory activity has contracted after three months of growth, and key economic indicators like the PMI for construction and services sectors have dropped below contraction levels.
The manufacturing sector’s PMI data shows contraction, with factory output shrinking partly due to an eight-day New Year break but also influenced by weak global demand. The construction sector’s PMI fell below 50 in December, signaling contraction despite some signs of business activity front-loading amid tariff fears.
Government fiscal support remains insufficient, driven by declines in local tax revenues from land sales and infrastructure spending growth at a mere 1.5% annual pace since 2021. Public spending has shifted focus away from infrastructure to social welfare, a change signals officials are pushing for more consumption-oriented policies in 2025.
The real estate crisis has also impacted state coffers by reducing tax revenues, underlining the fiscal challenges ahead. As China prepares to step up its economic support next year, officials have indicated a greater focus on consumption as part of their policy shift.
This article reflects the multifaceted challenges China faces in navigating its economic recovery amid stimulus limitations and structural issues.
Source: https://finance.yahoo.com/news/china-economy-loses-momentum-ahead-030352684.html