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Despite policy support, Chinese manufacturing activity is shrinking for the fifth month in a row

HONG KONG (AP) — Production in China shrank for a fifth straight month in February, according to an official survey of factory managers released Friday. This reflects continued weakness in the economy ahead of the annual legislative meetings where officials are expected to increase policy support.

The official purchasing managers index (PMI) fell in February from 49.2 the month before to 49.1 in February. The PMI is on a scale of up to 100, with 50 marking the dividing line between expansion and contraction.

The manufacturing PMI has fallen in ten of the past eleven months and only rose in September.

The February figures come despite Beijing’s recent measures to support the economy, including cutting home loan rates and lowering banks’ reserve requirements to boost lending.

A separate survey from financial news outlet Caixin showed the manufacturing PMI rose to 50.9 from 50.8.

“We think it makes sense to average both PMIs to gauge industry conditions,” said Huang Zichun of Capital Economics.

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“On this basis, the production value remained unchanged at 50.0 and is in line with factory activity which remained stable last month,” she said.

Because this year’s New Year’s holiday – a week-long national holiday – also falls in February, the figures may also be skewed by this period as factories are typically idle.

Meanwhile, the non-manufacturing PMI, which measures activity in sectors such as services and construction, rose to 51.4 from 50.7 in January. The value is the highest since September last year and is likely attributed to the strong increase in consumption around the Lunar New Year holidays.

Beijing is expected to focus on fiscal measures to stimulate the economy at the upcoming National People’s Congress (NPC) meetings starting March 5, as it seeks to boost consumption and investment and instill greater confidence in the stock market.

After a brief economic rebound following COVID-19, the world’s second-largest economy is struggling with an uneven recovery amid a real estate crisis and a slowing economy.

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China is also expected to announce its annual GDP growth target at the NPC.

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