A worker welds auto parts at an auto accessory manufacturing workshop in Huaibei, Anhui province, China on June 28, 2019. REUTERS / Stringer

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BEIJING, Dec.31 (Reuters) – Activity at Chinese factories picked up unexpectedly in December, but only by a small margin, an official survey showed on Friday, with analysts predicting more economic headwinds in the near term and policymakers being forced to offer supportive measures.

The official manufacturing purchasing managers index (PMI) rose to 50.3 from 50.1 in November, according to data from the National Bureau of Statistics (NBS).

Analysts expected it to drop slightly to the 50 point mark, which separates growth from contraction.

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The world’s second-largest economy has run out of steam since the start of the summer after recovering from last year’s pandemic crisis, weighed down by the slowdown in the manufacturing sector, debt problems in the real estate market, restrictions linked to carbon emissions and small-scale COVID-19 epidemics.

Next year, China will face “unprecedented” difficulties in stabilizing trade, Vice Commerce Minister Ren Hongbin warned Thursday, as production capacity in other exporting countries recovers from induced shocks. by COVID and compete with Chinese exports.

“In January, we expect the manufacturing PMI to fall to 50.0, weighed down by stricter-than-usual anti-pollution measures to ensure blue skies for the next Winter Olympics which begin in early February and the contraction in demand due to the slowdown in real estate and the slowdown in export growth, ”Nomura economists wrote in a note.

Data from the Bureau of Statistics showed that a new orders sub-index improved slightly in December but remained in contraction, to 49.7 from 49.4 in November.

New export orders fell further, with the sub-index standing at 48.1 from 48.5 a month earlier, indicating fragile foreign demand.

A sub-index for production remained in positive territory at 51.4, but was below November’s 52.0.

“Compared to previous cycles, we believe the pain threshold is higher because Beijing has placed more weight on long-term goals than on short-term growth stability,” Nomura said.

“Still, there is a limit to how much they will allow growth to slow, and that limit could be seriously tested in the spring of 2022.”

COVID DISRUPTIONS

The wealthy Zhejiang province on China’s east coast experienced a small-scale COVID-19 outbreak in December, which has now subsided, but some companies have been forced to halt production.

In the northwest, the industrial and technological center of Xian has been locked down as a local epidemic continues to spread in the city of 13 million people. Read more

Samsung Electronics (005930.KS) and Micron Technology (MU.O), two of the world’s largest memory chip makers, have warned that the city’s ongoing lockdown could affect their chip manufacturing bases in the region. Read more

Activity in China’s overall services sector grew at a slightly faster pace in December, to 52.7 from 52.3 in November.

China’s official composite PMI, which includes both manufacturing and services activity, stood at 52.2 in December, unchanged from November.

Analysts expect a further slowdown in gross domestic product (GDP) in the fourth quarter after the economy grew 4.9% in July-September.

Debt crises among major real estate developers amid a crackdown on the real estate sector have hurt an industry critical to China’s economic growth.

In mid-December, the central bank reduced the reserve requirement ratio (RRR) – the amount of liquidity banks must hold in reserve – to support slowing economic growth. Read more

The bank has said it will keep its monetary policy flexible next year as it seeks to stabilize growth and lower financing costs for businesses in a growing economy.

Bruce Pang, head of macro and strategic research at China Renaissance Securities, said he expected more support measures to be rolled out.

“In our view, 2022 should bring more targeted relaxation to organize a soft landing and support SMEs, high-tech and innovation companies, advanced manufacturing and green industries,” Pang said.

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Reporting by Ryan Woo and Gabriel Crossley; edited by Richard Pullin

Our Standards: Thomson Reuters Trust Principles.