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China's Economy Continues Decline

  • VOA News

FILE - An employee works on an assembly line producing Mercedes-Benz cars at a factory of Beijing Benz Automotive Co. (BBAC) in Beijing. Observers say last month's PMI may have been affected by the annual Lunar New Year holiday, when factories traditionally shut down and workers return home.

FILE - An employee works on an assembly line producing Mercedes-Benz cars at a factory of Beijing Benz Automotive Co. (BBAC) in Beijing. Observers say last month's PMI may have been affected by the annual Lunar New Year holiday, when factories traditionally shut down and workers return home.

New figures released Tuesday shows activity in China's manufacturing sector has fallen to its lowest level in four years, the latest sign of weakness in the world's second-largest economy.

The official Purchasing Manager's Index, or PMI, which tracks activity in factories, dropped to 49.0 in February, down from the 49.4 figure posted the month before. Any reading above 50 signals expansion, while a reading below 50 indicates contraction. It was the seventh straight month of contraction in the official PMI, and the lowest reading since November 2011.

A separate PMI survey by the private Caixin financial media company, which focuses more on smaller firms, came in at 48, the 12th consecutive month of contraction.

FILE - A closed brick factory building on the outskirts of Beijing, China. The official Purchasing Manager's Index, or PMI, which tracks activity in factories, dropped to 49.0 in February.

FILE - A closed brick factory building on the outskirts of Beijing, China. The official Purchasing Manager's Index, or PMI, which tracks activity in factories, dropped to 49.0 in February.

Observers say last month's PMI may have been affected by the annual Lunar New Year holiday, when factories traditionally shut down and workers return home.

China's economy grew at an annual rate of 6.9 percent in 2015, its slowest pace in 25 years, due to manufacturing overcapacity and further contractions in domestic and export orders. The slowdown comes as the country struggles to transition from an export-driven economy to one sustained by consumer demand.

Tuesday's news could spur policymakers in Beijing to launch another round of stimulus spending and boosting the money supply. The People's Bank of China late Monday announced it was cutting the amount of cash that banks must hold as reserves by as much as 50 basis points. The PBOC also injected an estimated $100 billion in cash into the banking system to spur new lending.

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