China's factory activity contracts in Dec

China's manufacturing activity shrank for a fifth straight month in December, as COVID-19 outbreaks continued to weigh on both output and demand, a private sector pool showed on Tuesday.

The Caixin China General Manufacturing Purchasing Managers' Index fell to 49 in December from 49.4 in November, staying below the 50-point mark separating growth from contraction, media group Caixin said.

Wang Zhe, senior economist at Caixin Insight Group, said the drop came as COVID-19 outbreaks continued to weigh on manufacturing activity.

"Both manufacturing supply and demand continued to shrink last month," Wang said.

Caixin data showed subindexes for output and new orders stayed in the contraction territory for the fourth and fifth straight month, respectively, in December. Due to the sluggish global economy and weakening overseas demand, the gauge for new export orders also remained in contraction territory for the fifth straight month in December.

However, optimism improved significantly among businesses. The reading for manufacturers' expectations for future output reached the highest since February, and firms expressed strong confidence in economic recovery following the easing of COVID containment measures, according to Caixin.

"In the short term, COVID infections are expected to explode (in China), which will severely impact production and life order. How to effectively coordinate COVID controls with economic and social development has once again become the top priority," Wang said.

Citing the annual Central Economic Work Conference concluded last month, Wang said policymakers have made it clear that priority must be given to the recovery and expansion of domestic consumption, which requires improving social expectations and confidence as well as more efforts to stabilize the job market and effectively increase the disposable income of residents.