China Factory Sector Jolts by Shrinking in January (Reuters, Jan 31) China’s official purchasing managers’ index (PMI) settled at a reading of 49.8 for January, down from 50.1 in December, according to figures from the National Bureau of Statistics. Last month’s results signal the first contraction for China’s manufacturing sector since September 2012. Of 11 economists polled by Reuters, only one had predicted a contraction. January is traditionally a busy month for Chinese factories, with activity jumping just ahead of Chinese New Year. A sub-index measuring net export orders hit 48.4 last month, down from 49.1 in December.

Signs of slack were also evident in China’s services sector, with a separate non-manufacturing PMI drifting to 53.7 last month, down from 54.1 in December.

RELATED: China January HSBC Factory PMI Contracts for Second Month (Reuters, Jan 1) HSBC/Markit issued its January PMI with a headline reading of 49.7 – right between a final December tally of 49.6 and a flash January reading of 49.8. The private survey focuses mainly on smaller companies, while China’s official PMI is weighted towards larger state-owned companies.

China Top Spot for FDI in World in 2014 (China Daily, Feb 2) The Chinese mainland received $128 billion in foreign direct investment (FDI) last year, according to a recent report from the United Nations Conference on Trade and Development. Foreign capital flows into service sector targets were up 7.8% from 2013 and represented 55.4% of China's total FDI take, according to figures from the Ministry of Commerce. Investment in capital-intensive industries dropped 12.3% over the same period, representing just over one-third of last year's FDI total.

China Miners, Power Firms Agree to Cut 2015 Contract Coal Price (Reuters, Jan 3) China's top coal producer, Shenhua Group, set its Q1 price for 5,500-kcal coal at 520 yuan per ton for power-plant consumers, according to Reuters reports citing the China Securities Journal. This price marks a 19% reduction over the on-year period, yet Chinese benchmark thermal coal still sells for about $13 more per ton than Australian seaborne cargos, not including freight costs. In the interest of avoiding a domestic pricing war, Chinese regulators have encouraged miners not to undercut each other. Shenhua's new contract price may represent a compromise between miners and consumers, with the former originally wanting 530-550 yuan per ton while the latter pressed for 490-500 yuan.

Oil’s Low Share of China’s Energy Mix Means Full Impact Yet to be Felt (SCMP, Feb 2) Tumbling crude prices could save mainland oil importers some $110 billion this year, the South China Morning Post reported, citing UBS estimates. But while China is one of the world’s largest crude importers, oil accounts for only about 18% of the country’s energy mix, giving downstream energy consumers limited space to save. Furthermore, experts say Chinese authorities have been raising oil consumption taxes as product prices decline, leaving locals with only half the savings as consumers elsewhere. Wang Tao, an analyst with UBS, estimates that current mainland gasoline and diesel prices equate to crude prices of about $70-75 per barrel, compared with global market prices of roughly $50.

China New-Home Prices Reverse Decline in January Vs December (Dow Jones Business News, Jan 31) New home prices in 100 major Chinese cities rose by an average of 0.2% month-on-month in January, bouncing back from a 4% decline in December and snapping an eight-month downturn, according to information from the China Real Estate Index System. But despite the monthly rebound, prices were down an average of 3.1% year-on-year in January, accelerating from annual drops of 2.7% and 1.6% in December and November respectively.

Slowing Economy Crimps China’s Fiscal Revenue (China Daily, Jan 31) Broad fiscal revenue grew 7.2% in 2014, the slowest rate of increase in 24 years, according to figures from China’s Ministry of Commerce. Softness in China’s real estate market has dampened fiscal income growth from a number of related fees and taxes. Specifically, revenue from land transfers – which usually account for about three-quarters of government funds – increased only 3.2% last year, down substantially from 44.6% in 2013. Taxes from property transactions rose only 4%, decelerating from 33.6% growth in 2013. Meanwhile, government expenditures were up 8.2%, the smallest increase since 1987.

 

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