Trouble in China's manufacturing industry continues, as new data show slowing output and rising layoffs, a further sign of the economic malaise affecting the world's second-largest economy.
In China's once-thriving factory regions, the new year has brought more bad news, with plants shutting down, bankruptcy courts struggling to sell assets and confidence faltering.
The Caixin China General Manufacturing Purchasing Managers' Index in January marked its 11th consecutive month in contraction territory, with a reading of 48.4. Anything below 50 is a signal for negative growth in the index, which offers a snapshot of manufacturing health.
The official Chinese PMI, at 49.4 in January, also indicated ongoing shrinkage in the sector that has been a key pillar of the country's economy. Released Sunday, that figure was the weakest since 2012.
China's economic signals are conflicting, with some bellwethers, like car sales, once again rising.
But the PMI data are among the first important Chinese economic indicators in 2016, and they offer little reason for hope after a rocky start to the new year. By midafternoon Monday in Asia, oil prices had fallen nearly 2 per cent, while Chinese markets also slipped more than 1 per cent and the yuan nudged downward. The Shenzhen and Shanghai composite indexes have both lost roughly a quarter of their value so far this year.
"The economy is still in the process of bottoming out and efforts to trim excess capacity are just starting to show results," He Fan, chief economist at Caixin Insight Group, said in a statement. "The pressure on economic growth remains intense in light of continued global volatility."
The Caixin data show stocks of finished goods continuing to rise and employment falling at the strongest pace in four months. Chinese manufacturers have now been in layoff mode for 27 months. The sector is nearing the year-long PMI contraction it saw in 2011 and 2012, its worst since the index was launched in 2004.
China went on "a debt binge" after the 2008 financial crisis, and "the process of working out debt problems and de-levering is unlikely to be resolved any time soon," said Li Wei, director of the China Economy and Sustainable Development Center at the Cheung Kong Graduate School of Business.
He oversees the CKGSB Business Conditions Index, a different measure of corporate sentiment that in January came in at 51.2, a mark of only slight optimism (anything below 50 is pessimistic), that is down dramatically from 61.3 in May 2015.
Prof. Li also sits on several corporate boards in the midst of bankruptcy proceedings, "and for some of the assets that they are trying to unload in auction houses there has been no bidder. So all of this takes time," he said. "We expect probably 2016 and well into parts of 2017 there won't be much change in the way that China numbers are going to look."
Chinese stock-market turmoil, in particular, is exacting a heavy toll on companies. Although much of the daily trading is conducted by at-home investors, they hold only about 40 per cent of shares. The remainder resides with governments and companies with large corporate cross-holding positions, some used as loan collateral.
Many firms in that situation now "have hit the point where there is a margin call on them," Prof. Li said.
At the same time, the manufacturing sector "is struggling to transition away from overcapacity," particularly in smokestack industries like cement, steel and coal, said Simon Gleave, a partner in the financial services practice at KPMG in Beijing.
But, he said, China is also "beginning to see some really positive signs in the economy."
Take car sales which, after falling mid-year, rebounded strongly at year-end, rising 20 per cent in November. A significant tax cut helped move smaller-engined cars off lots, but in 2015 it was SUV sales that did best in China, up 52.4 per cent. The number of Chinese with driver's licences is still rising at 12 per cent a year.
And while housing starts have now fallen for two years, housing prices were up 7.7 per cent in December, and China reached a record 7.3-trillion yuan ($1.55-billion Canadian) in nationwide home sales in 2015. Just over half of China's major housing markets are now seeing rises in home prices, after 13 months of declines ended in October.
Here, too, there are underlying problems, including a staggering 13 million vacant homes – and recent buying has been propelled in part by government incentives.
But the price gains make it harder to predict the worst for China, Mr. Gleave said.
"I don't see how you can have a hard landing if housing is picking up and car sales are picking up," he said.
That's not to say 2016 will bring much in the way of good times.
China is still "struggling very much" with poor-quality economic gains, Mr. Gleave said. Rather than chase long-term sustainable growth, "the government is trying to get eye-catching headlines that they've hit targets – but that gives you a very low return on capital investment."
For now, China's economy is "just bumping up and down a bit and we might get a few more knocks on the way."