Asia Pacific Economic Research01 January 2024J P M O R G A Nwww.jpmorganmarkets.comEmerging Markets Asia, Economic and Policy ResearchGrace Ng(852) 2800-7002grace.h.ng@jpmorgan.comHaibin Zhu(852) 2800-7039haibin.zhu@jpmorgan.comTingting Ge(852) 2800-0143tingting.ge@jpmorgan.comJi Yan(852) 2800-7673ji.yan@jpmorgan.comJPMorgan Chase Bank, N.A., Hong Kong Branch•China�s December NBS PMI report came in on the soft side again. The manufacturing PMI fell 0.4-pt to 49.0, adding to the decline of 0.1-pt in November, registering the lowest reading in seven months. •Demand-supply imbalance remained notable, with the manufacturing PMI output component staying above the 50 expansion threshold (down 0.5-pt to 50.2 in December), while new orders (down 0.7-pt to 48.7) and export orders (down 0.5-pt to 45.8) stuck below 50. Corporates reported that slowing external demand and insufficient domestic demand remain the key challenges for the manufacturing sector at this moment. •The NBS non-manufacturing PMI rose modestly by 0.2-pt to 50.4 in December, still registering the second-lowest reading since the beginning of the year (when the economy came out of the pandemic drag). The service activity component remained unchanged at the subdued level of 49.3 in December, staying below the 50 expansion threshold for the second consecutive month, with travel-related activities losing momentum amid cold weather. •On the other hand, the construction activity index rose further by 1.9-pt to 56.9 (the highest reading in seven months), suggesting solid infra FAI related activity amid fiscal policy support. •Putting together the manufacturing and non-manufacturing components, the NBS composite PMI output fell further by 0.1-pt to 50.3 in December, registering the lowest reading since the beginning of the year. This suggests that, following the solid recovery in 3Q, overall economic activity momentum eased steadily toward late 4Q. •Impact of the latest policy support measures will likely be reflected in the coming quarters. We expect the economy to exhibit a solid recovery momentum in 1H24 (5.1%q/qsaar), before moderating to trend growth in 2H24 (4.3%q/q, saar). Our full-year growth forecast for 2024 stands at 4.9%. A risk factor is that potential inventory buildup amid demand-supply imbalance may be a drag on economic growth in the coming quarters. Following the mixed performance of November activity data, China�s NBS PMIs came in on the soft side again in December. The NBS manufacturing PMI fell 0.4-pt to 49.0 in December (J.P. Morgan and consensus estimate: 49.6), following the decline of 0.1-pt in November, and registering the lowest reading in seven months. Further details suggest an easing in production activity and demand conditions, with a decline in the components of output (down 0..5-pt to 50.2 in December), new orders (down 0.7-pt to 48.7) as well as export orders (dow...
