By Gina Lee

Investing.com – China’s factory activity continued to grow, albeit at a slower pace, in December. Export demand continued to fuel economic recovery, but growth was slowed by higher labor and transport costs.

Data released by the National Bureau of Statistics (NBS) earlier in the day showed the manufacturing Purchasing Managers Index (PMI) at 51.9, down from the reading of 52 in forecasts prepared by Investing.com and November’s 52.1 figure. The non-manufacturing PMI was at 55.7, also down from November’s reading of 56.4. Both PMIs remained above the 50-mark indicating expansion.

NBS economist Zhao Qinghe said despite the slight fall in the PMI “the overall manufacturing industry maintained a good momentum of steady recovery”

The world’s second-largest economy continued its recovery from tough COVID-19-induced lockdowns earlier in the year, with Christmas demand boosting overseas demand for manufactured goods and an uptick in domestic activity. With the pandemic largely under control in most of the country, China is still on track to be the only major economy that reported growth in 2020. Economists have forecast an expansion of around 2% for the full year, the weakest pace in over three decades but much stronger than other major economies.

Demand for medical equipment and work-from-home electric devices have continued to prop up exports, which surged in the run-up to the end of the year and the holiday season as the number of COVID-19 cases globally continue to rise incessantly.

There are over 82.6 million COVID-19 cases globally as of Dec. 31, according to data from Johns Hopkins University.

However, severe cold weather and power shortages in parts of the country in December, on top of winter output restrictions in industries such as steel and coal, could weigh on production.

Tighter COVID-19 control measures in many of China’s key trading partners, including the U.S. could also put a dent in industrial demand and weigh in on the recovery.

An outbreak of COVID-19 cases has seen Beijing impose lockdowns on the impacted areas, the first since the outbreak in June and July, could also dampen demand as it comes ahead of the peak travel season.

However, some investors remained optimistic.

“It is still a level that is consistent with very solid growth,” Qian Wang, Asia-Pacific chief economist at Vanguard Group Inc., told Bloomberg.

“The Chinese economy seems to be holding up pretty well in spite of the second wave on the external side.”

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