China slowdown to continue into new year as trade war dampens sentiment

China heads into the new year with its factories back in contractionary territory as the threat of a prolonged trade war dampens sentiment and stimulus struggles to gain traction.

The manufacturing purchasing managers index dropped to 49.4 in December, the weakest since early 2016 and below the 50 level that denotes contraction. Measures of new orders and new export orders slipped -- a bearish signal for future demand -- while readings for input and output prices weakened.

"The slowdown will continue into the next year," said Larry Hu, a Hong Kong-based economist at Macquarie Securities Ltd. "The weak PMI could result in