Laborers work in a shoe factory in Jinjiang, south China's Fujian province

Chinese manufacturing activity slipped to its lowest level in six months, with indications of slowing growth for the quarter to come in the world’s second-largest economy.

The National Bureau of Statistics said its purchasing managers’ index (PMI) for January slipped to 50.5, a reading just above the threshold for quickening growth. While output was still expanding, a sub-index for new export orders hovered for the second month below the midpoint, indicating slowing growth, and pointing to a lull in factory operations for the next few months.

Concern over a slowdown in the Chinese economy contributed to the turmoil that has hit some emerging markets over the past 10 days. Saturday’s data are unlikely to ease those worries.

The Chinese new year holiday, which began on Friday, normally corresponds with lower manufacturing activity as overseas orders dry up, workers go home and factories close down. But a number of Chinese indicators all point to muted growth even after the holiday, as both private and state-owned businesses and the state curtails investment spending. “Looking ahead, we expect tighter credit conditions to continue to weigh on the manufacturing sector over the coming months,” wrote Julian Evans-Pritchard of Capital Economics in Singapore.

Saturday’s PMI reading is the lowest since July, as the impact of a mini-stimulus that had spurred activity in the third quarter eased. That squares with data released by the statistics bureau on Friday, which showed growth in profits at the nation’s larger industries slowed sharply to 6 per cent in December, from the previous month.

More worrisome was the discrepancy between profits from companies’ core businesses, which were flat on year in December, and the growth in total profits – implying that China’s larger firms are relying on property investment, shadow bank lending or other activities rather than their core business to turn a profit. For the full year, total profits rose by more than 12 per cent but profits from core businesses rose by a mere 4 per cent.

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