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At a glance
SURVEY SAYS: Chinese manufacturing looks set to contract in January for the first time in six months, further evidence of a slowdown that complicates reform efforts in the world’s No. 2 economy.
THE NUMBERS: The preliminary version of HSBC’s purchasing managers’ index dipped to 49.6 this month from December’s 50.5 reading. It’s the lowest reading since July’s 47.7. The index is based on a 100-point scale on which numbers above 50 indicate expansion.
LOSING STEAM: The report adds to recent signs that China’s economy is decelerating, adding to pressure on its Communist leaders who want to bring in sweeping reforms while keeping growth ticking along.
Associated Press
Workers fold towels at a factory in Shandong province. Signs that Chinese manufacturing is losing steam add to pressure on Communist leaders who want to bring in sweeping reforms without hurting growth.

China factory index: 1st contraction in 6 months

– Chinese manufacturing looks set to contract in January for the first time in six months, according to a survey released last week, further evidence of a slowdown that complicates reform efforts in the world’s No. 2 economy.

The preliminary version of HSBC’s purchasing managers’ index dipped to 49.6 this month from December’s 50.5 reading. It’s the lowest reading since July’s 47.7. The index is based on a 100-point scale on which numbers above 50 indicate expansion.

The report on China’s massive manufacturing industry adds to recent signs that the world’s second-biggest economy is decelerating, adding to pressure on China’s Communist leaders who want to bring in sweeping reforms while keeping growth ticking along.

Data released this month showed China’s economy expanded 7.7 percent last year, tying 2012 for the weakest annual performance since 1999.

China’s economic growth has slowed from its searing double-digit rates of the past decade, although it’s still expanding much more quickly than the United States, Japan or Europe.

However, the unexpectedly sharp decline raises the risk of politically dangerous job losses and heightens challenges faced by the ruling Communist Party as it tries to shift the basis of the economy to domestic consumption rather than trade and investment.

HSBC’s survey is based on responses from 85 percent to 90 percent of 420 factories, with the full version to be released Thursday.

The report’s factory-output subindex fell to a three-month low, while new orders, new orders for export and employment decreased.

January’s “marginal” contraction was mainly dragged down by “cooling domestic demand conditions,” said Qu Hongbin, HSBC’s chief China economist. “This implies softening growth momentum for manufacturing sectors, which has already weighed on employment growth.”

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