More policy support sought to boost demand

China's factory activity contracted for the third consecutive month in December, heightening the call for stronger policy support to stimulate domestic demand and promote the high-quality development of the manufacturing sector, according to analysts.

China's official purchasing managers index for the manufacturing sector fell to 49 in December from 49.4 in November, below the 50-point mark that separates contraction from growth, the National Bureau of Statistics said on Sunday.

"The PMI declined amid still-weak domestic and external demand, and December also marks the off-season for sectors such as textiles and some raw materials," said Zhou Maohua, an analyst at China Everbright Bank.

Despite the pressures and challenges ahead, Zhou expressed optimism about the future development of the manufacturing sector, anticipating a more balanced recovery amid the gradual recovery of consumption.

The NBS also reported that business confidence is improving, with the reading for manufacturers' expectations for future output and business operations standing at 55.9 in December after 55.8 in November.

Meanwhile, China's non-manufacturing PMI came in at 50.4 in December, up from 50.2 a month earlier. Also, the country's official composite PMI, which includes both manufacturing and non-manufacturing activities, stood at 50.3 in December compared with 50.4 in November, according to the NBS.

Considering the country's strong counter-cyclical and cross-cyclical adjustments as well as seasonal service needs, Zhou anticipates continued expansion in nonmanufacturing activities in the coming months.

Zhou emphasized that prioritizing effective demand and encouraging consumption will remain crucial for reinforcing the world's second-largest economy. He added that the country should optimize policy tools to address the uneven recovery among different segments.

Zheng Houcheng, chief macroeconomist at Yingda Securities, said the latest figures indicate that China's broader economy is still facing pressures.

"Against that backdrop, we think the country may set an annual growth target of around 5 percent next year. A further reduction in the reserve requirement ratio as well as policy rate cuts will be likely in the first quarter of next year," Zheng said.

Despite facing challenges like a property market slump and risks associated with local government debts, Zhu Guangyao, the former vice-minister of finance, said China's economy will likely expand by around 5 percent next year, given its potential growth rate standing at 5 percent to 6 percent.

Speaking at a seminar held by the China Center for International Economic Exchanges on Friday, he said that China still possesses many favorable conditions and advantages in new fields such as green development and digital economy, which will play a key role in driving China's healthy and sustainable development in the next few years.

Zhu's views were echoed by Zhang Yongjun, deputy chief economist at the China Center for International Economic Exchanges, who told China Daily that fostering new growth drivers and promoting high-quality development will be key to bolstering the world's second-largest economy next year.