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Home / Business / China's factory activity shrinks in the fourth month as trade problems deepen

China's factory activity shrinks in the fourth month as trade problems deepen



Workers assemble TVs in production line of Tianle Group Co., Ltd. on July 3, 2012 in Shengzhou, Zhejiang Province, China.

Feng Li | Getty Images

China's factory activity shrank in August for the fourth month in a row as US trade pressure increased and domestic demand remained sluggish, indicating a further slowdown in the world's second largest economy.

Ongoing The weakness of the vast Chinese manufacturing sector may fuel the expectation that Beijing will have to provide faster and more aggressive impetus to survive the biggest downturn in decades.

The PMI fell to 49.5 in August, China's national The Bureau of Statistics announced on Saturday against 49.7 in July, dropping the 50-point mark, which separates the monthly growth from the contraction ,

According to a Reuters poll, PMI should remain unchanged for August from the previous month.

] The official factory display showed that trade breaks with the United States increased and the slowdown in global demand continued to affect China's exporters. In August, the month fell in succession, albeit more slowly, with the sub-index rising from 46.9 to July 47.2 increase.

Total incoming orders from home and abroad also continued to decline, suggesting that domestic demand remains weak despite weak growth Numerous growth-enhancing measures over the past year.

"The premature drop in US exports to higher tariffs fueled growth in trade and overall activity, but this effect is likely to subside in the next few months," Goldman Sachs analysts said in a note.

Manufacturers in consumption-oriented industries, as the car sector was particularly at risk. Automakers such as Geely and Great Wall have lowered their sales and profit expectations.

The data showed that activities of medium-sized and small enterprises were declining, although large manufacturers, many of whom were supported by the government, expanded in August. [1

9659002] The factories continued to cut jobs in August amid uncertain business prospects. The employment sub-index fell to 46.9, compared with 47.1 in July.

Escalations

In August, there were dramatic escalations in the bitter, year-long Sino-US trade crisis when President Donald Trump announced earlier this month that he would do so by levying new tariffs on Chinese goods from 1 September and China will weaken its yuan currency days later.

After Beijing retaliated with retaliatory tariffs, Trump said the existing charges would also be raised in the coming months. The combined measures now effectively cover all Chinese exports to the United States.

Trump said late Friday that the trade teams on both sides will continue to talk and meet in September, but tariff increases for Chinese goods should come into effect Sunday will not be delayed.

The US president said earlier this week that China wanted to reach a "very bad" deal by citing Beijing's growing economic pressure and job losses.

But most analysts It is highly doubtful that the dispute will be over soon, and some have recently cut Chinese growth forecasts in the coming quarters.

The sudden worsening of trade relations has led to speculation as to whether China needs to introduce more stringent measures to maintain them. Analysts are generally predicting that Beijing will lower some of its key lending rates for the first time in four years in September to stabilize growth.

But sources had told Reuters before the recent trading escalations that large rate cuts were seen as a last resort as policymakers feared that further increases in debt fueled the bank's profit margins and could increase risks to the financial sector.

So far, Beijing has relied on a combination of fiscal stimulus and monetary easing to tackle the economic slowdown, including billions in infrastructure spending and corporate tax cuts.

But analysts note infrastructure investment growth has remained subdued despite earlier pump priming measures, underscoring the need for additional support.

Service sector growth

Chinese service sector growth rebounded in August for the first time in five months The numbers from a separate company survey increased from 53.7 in August to 53.8.

Beijing has relied on a strong service sector to cushion some of these factors, the economic impact of trade uncertainties and sluggish production activities.

Despite the overall higher number of activities in the real estate industry shrank, the statistics office said in a statement.

The service sector has been supported by Chinese consumers – rising wages and robust purchasing power in recent years. Towards the end of last year, however, the sector eased following a more general slowdown.


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