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China's factories contract in latest warning for economy


China's factories contract in latest warning for economy


News from China’s factories is not good, with activity contracting in December for the first time in seven months.

Erratic exports, an overheated domestic property market, and tight credit are being blamed, although overall growth is being supported by a bouyant services sector. However a change of direction is needed if faster growth is the target.

“What we’re really focusing upon is the fact that the government is
committed to reform and to rebalancing the economy towards consumption from an investment-driven model,” says Fidelity Worldwide Investment’s Medha Samant.

The figures are the latest damp squib to sound warnings at the central bank, which says it has not ruled out further stimulus measures for China if growth stalls.

While Chinese firms grew even more wary of borrowing and investing in the first quarter, they still managed to defend profit margins thanks to lower input costs for commodities and labor.

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