Manufacturing, services growth mixed

Official index for industrial sector falls to 2014 low in Dec

China's manufacturing growth dropped in December to its lowest level of 2014, but the non-manufacturing sector has seen moderate expansion in two consecutive months, indicating that the services sector is playing an increasingly important role in driving China's growth, the National Bureau of Statistics (NBS) said Friday.

China's official Purchasing Managers' Index (PMI) released by the NBS came in at 50.1 last month, down from 50.3 in November.

The index, which tracks activity in factories and workshops, is considered a key indicator of the health of China's economy.

A figure above 50 signals expansion, while anything below indicates contraction.

"Growth momentum is still insufficient," NBS said.

British bank HSBC said Wednesday that its own manufacturing PMI for the month fell to 49.6, down from the break-even point of 50 in November.

"The decline of both official and HSBC PMIs suggests that China's manufacturing sector, especially those industries related to property market, is still struggling due to sluggish domestic demand," economists at ANZ Research said in a note.

But some data suggest that "real activity indicators should have accelerated in the last month of 2014, supported by proactive fiscal policy," ANZ Research economists noted.

The PMI for the non-manufacturing sector rebounded to 54.1 in December from 53.9 in November, NBS data showed. The index has shown moderate expansion for two consecutive months.

The NBS said that the services sector is playing an increasingly important role in driving China's economic growth, which also indicates an overall improvement in China's economic structure.

China's central bank surprised the market in November by cutting benchmark interest rates for the first time in more than two years, in a move interpreted as an attempt to shore up flagging growth.

The People's Bank of China announced on November 21 it would lower its one-year rate for deposits by 25 basis points to 2.75 percent and its one-year lending rate by 40 basis points to 5.6 percent.

The decision came after a string of disappointing statistics showed the Chinese economy struggling with not just stalling factory growth, but also other problems including soft exports and the weakening property market.

Authorities had for months used various kinds of limited stimulatory measures such as targeted cuts in bank reserve requirements and a cash injection into the country's five biggest banks for re-lending.