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Home / Business / Asia's Factory Activity Shrinks, Ceasefire between US and China Can not Improve Outlook By Reuters

Asia's Factory Activity Shrinks, Ceasefire between US and China Can not Improve Outlook By Reuters




© Reuters. FILE PHOTO: An employee works at the Maanshan Steel and Iron Factory in Hefei.

By Leika Kihara

TOKYO (Reuters) – In most Asian countries, factory activity shrank in June, as the smoldering trade dispute between the US and China caused further burdens. This continued to press policy makers to take stronger steps to avert a global recession.

Following the Group 20 summit in Osaka, Japan, where leaders warned on Saturday to slow global growth and increase geopolitical momentum and trade tensions.

The United States and China agreed to resume trade talks at the summit after President Donald Trump offered concessions, including new tariffs and relaxation of restrictions on technology company Huawei, providing some relief to companies and the financial markets. [1

9659004] Analysts doubt, however, that the ceasefire will lead to a sustained easing of tensions, while continuing uncertainty could dampen corporate appetite for spending global growth.

"It's too early to be optimistic, the two countries have just stepped on the can and it's not known what could happen next," said Yoshiki Shinke, chief economist at the Dai-ichi Life Research Institute in Tokyo ,

"Global manufacturing activity has not come to an end yet, and the confidence of US companies, especially manufacturers, has diminished, and if it does, it can damage economies around the world."

In China Asia's economic engine, the Caixin / Markit Manufacturing Purchasing Managers' Index (PMI) hit the market with 49.4 points behind market expectations and the worst since January.

It was the first time in four months that the sharply observed index monthly fell below the neutral 50-mark division between expansion and contraction. [19659004] Japan also saw output decline to a three-month low in June, putting a brake on new signs of economic activity as global demand weakened.

Regardless, a survey by the Bank of Japan (BOJ) found that the confidence of major manufacturers reached a near-three-year low and kept its central bank under pressure to sustain or even accelerate a massive stimulus package.

In South Korea, factory activity shrank in June as fast as in four months. A certain slowdown deepened, causing companies to cut production and cut jobs.

Manufacturing activity also declined in Malaysia and Taiwan, suggesting that the impact of the US-China trade conflict on the rest of Asia has widened.

The US and China The trade war has hampered business sentiment, disrupted supply chains and threatened to disrupt financial markets, and warned policymakers of the impact on the global economy.

The Executive Director of the International Monetary Fund, Christine Lagarde, welcomed the resumption of trade talks between the two countries, but warned that more needed to be done to revive a global economy that was already "rough-hewn".

Increasing concerns about global growth have forced some Asian central banks, such as those in Australia, New Zealand and India, to cut interest rates.

While G20 leaders said they were ready to take further action to sustain growth, many large economies have little fiscal and monetary room to deal with a renewed recession.

The expectation of a US Federal Reserve rate cut has put pressure on the European Central Bank and the BOJ, despite their dwindling options to halt growth.

"When the Fed lowers To contain the currency appreciation, the BOJ and the ECB need to do something stronger," said Sayuri Shirai, a former political decision-maker from the BOJ, who is currently a professor at the Japanese Keio University.


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