China factory activity shrinks for first time in 2 years

Chinese factory activity contracted for a second straight month in January, the official Purchasing Managers Index (PMI) showed.

The official Purchasing Managers’ Index (PMI) - the first snapshot of China’s economy each month - fell to 49.4 in December, below the 50-point level that separates growth from contraction, a National Bureau of Statistics (NBS) survey showed on Monday.

It was the first contraction since July 2016 and the weakest reading since February 2016. Analysts had forecast it would dip to 49.9 from 50.0 the previous month.

This highlights the challenges Beijing is facing as it seeks to end a bruising trade war with Washington and reduce the risk of a sharper economic slowdown in 2019.

The increasing strain on factories signals a continued loss of momentum in China, adding to worries about softening global growth, especially if the Sino-U.S. dispute drags on.

Trade frictions are already disrupting global supply chains, fuelling concerns of a bigger blow next year to world trade, investment, and shaky financial markets.

Several international companies have warned on China's slowdown, including Apple.

The tech giant blamed a 5% fall in revenues partly on China.

Shares of industrial equipment giant Caterpillar took a beating earlier this week after the company reported its sales slipped 4%, largely due to slow sales in China.

Chipmaker Nvidia also reported softer sales due to a sluggish Chinese market.

China has been attempting to reform its economy to rely more on domestic consumption instead of exports and investment to fuel growth.

The latest figures come as officials from both sides meet in Washington to try ease trade tensions.

If the two sides cannot reach an agreement by 1 March, the US has said it will increase the tariff rate from 10% to 25% on Chinese goods worth an estimated $200bn (£154.4bn).