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Home / Business / China's factory activity shrinks as US tariffs slow orders By Reuters

China's factory activity shrinks as US tariffs slow orders By Reuters




© Reuters. Workers steer a crane to lift steel tubes for export to a port in Lianyungang, Jiangsu

PEKING (Reuters) – According to an official production survey, China's factory activity shrank more than expected in June and weaker domestic demand increased the pressure on new orders for goods ,

The PMI stood at 49.4 on Sunday in June, according to the Chinese Bureau of Statistics, and remained flat versus the previous month, below the 50 mark mark separating the monthly growth from the contraction. Analysts polled by Reuters predicted a value of 49.5.

Weak manufacturing data should cast a shadow over the apparent progress made by US and Chinese leaders at the G20 summit in Japan over the weekend in resuming their troubled tariff negotiations under a costly trade war.

They will also raise concerns about China's cessation of growth and the risk of a global recession, although export and industry earnings data in May were slightly better than expected.

Many economists still expect this In the coming months, strong headwinds are expected as domestic demand falter and external risks increase.

"Although the outcome of the G20 summit (in Osaka) could boost some companies' confidence, organic economic growth is still inadequate and counter-cyclical." Huatai Securities researchers wrote in a research note on Sunday that the policy remains "The sub-index for commodity stocks rose due to weak demand," says the research note.

China's production growth slowed in June. The sub-index fell from 51

.7 in May to 51.3, while the decline in total order intake accelerated to 49.6 from 49.8.

Export orders continued to fall, with the sub-index falling from 46.5 to 46.3 from May, suggesting a further weakening in global demand.

Import orders also deteriorated, reflecting weaker domestic demand despite strong growth – support measures were introduced earlier this year.

According to Southwest Securities, weak new export orders reflected a slowdown in the frontloading effect, which temporarily boosted exports as Chinese companies placed orders before further tariffs came into force.

Presidents Donald Trump and Xi Jinping held icebreaker talks on Saturday at the G20 summit. However, Chinese state media warned on Sunday before Beijing and Washington are likely to have a long way to go before the two countries can reach an agreement.

Nomura analysts expect profits from a temporary trade agreement between China and the United States to be fleeting Trump has already imposed tariffs on Chinese goods worth $ 250 billion and threatens to raise them to another $ 300 billion Dollars, which would cover virtually all Chinese exports to the United States. China has retaliated with tariffs on US imports.

In order to meet the economic challenges, policymakers have taken a number of measures that are expected to trigger more. Prime Minister Li Keqiang pledged last week to lower real interest rates for small and micro-enterprise finance.

Goldman Sachs (NYSE 🙂 said the lack of substantial progress in Sino-US trade talks with the G20 over the weekend has suggested incentives. Including cuts in banks' reserve requirements was probably necessary.

"We expect further policy easing in the next few months (two more cuts in reserve requirements in the second half of the year, further tax measures to support infrastructure investment)," said Goldman Sachs in a note.

Manufacturers continued to reduce jobs in June, with the employment index falling to 46.9, compared to 47.0 in May, when it reached its lowest level since March 2009.

An official business survey revealed that activity in China's services sector remained stable in June despite increasing pressure on the overall economy by US trade measures, with the official reading at 54.2 in June from 54.3 in May.

Beijing has relied on a strong service sector to cushion the easing while it tries to shift the economy away from the dependence on heavy industry and industrial exports.


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