China’s factory activity deteriorated further in December as COVID-19 containment measures and softer demand forced manufacturers to downsize production.

The Caixin manufacturing Purchasing Managers’ Index edged down to 49.0 in December from 49.4 in the previous month, survey results published by S&P Global showed on Tuesday.

The reading has remained below the neutral 50.0 mark for the fifth month, suggesting contraction as COVID-19 outbreaks dampened manufacturing activity.

The official PMI survey results published over the weekend also showed that the manufacturing and services sectors have weakened the most since early 2020.

This is despite the abrupt abandonment of the zero-COVID-19 policy in December.

New business continued to fall due to relatively weak demand conditions amid the ongoing pandemic, S&P Global said. Foreign demand declined quicker due to the sluggish global economic situation and the pandemic.

Production dropped at the softest pace in four months. 

In line with the fall in new orders, companies reduced their purchasing activity at a faster rate. Inventories of purchased items and finished goods decreased further.

There was another reduction in employment due to lower production requirements and difficulties in sourcing workers. Average input prices increased only slightly in December, and firms continued to lower their selling prices as part of efforts to boost competitiveness.

Manufacturers were more optimistic about their production outlook as the pandemic situation improved and market conditions strengthened.

“Overall, the pandemic continued to take a toll on the economy in December,’’ Wang Zhe, a senior economist at Caixin Insight Group, said.

Infections are expected to explode quickly, severely interfering with production and everyday life.

“How to effectively coordinate COVID controls with economic and social development has once again become a crucial question,’’ the economist said.