China fac­tory growth eases, ex­port de­mand slips in July

Kuwait Times - - BUSINESS -

Growth in China’s man­u­fac­tur­ing sec­tor cooled slightly in July as for­eign de­mand for Chi­nese goods slack­ened, but a gov­ern­ment-led in­fra­struc­ture push kept con­struc­tion hum­ming and helped prop up the world’s sec­ond-largest econ­omy.

The of­fi­cial Pur­chas­ing Man­agers’ In­dex (PMI) held above the 50-point mark that sep­a­rates growth from con­trac­tion for the 12th straight month, as China poured funds into a con­struc­tion boom that has fu­elled de­mand for ev­ery­thing from ce­ment to steel and other build­ing ma­te­ri­als.

But the broad con­sen­sus among China watch­ers is that eco­nomic growth will cool in com­ing months as a gov­ern­ment crack­down on fi­nan­cial risks raises bor­row­ing costs for busi­nesses and squeezes prof­its.

The of­fi­cial PMI stood at 51.4 in July, the Na­tional Bureau of Statis­tics said yes­ter­day, down from the pre­vi­ous month’s 51.7 and a touch be­low the 51.6 fore­cast in a Reuters poll. Ex­port or­ders, which helped Chi­nese fac­to­ries stage a strong re­cov­ery in June, had ebbed this month, with man­u­fac­tur­ers re­port­ing slack­en­ing for­eign de­mand. Over­all fac­tory pro­duc­tion ex­panded less quickly com­pared with June.

New ex­port or­ders slipped to 50.9 in July from 52.0 in June, help­ing drag the in­dex for over­all fac­tory or­ders to 52.8 from 53.1. “The break­down sug­gests weaker for­eign de­mand is partly to blame - the new ex­port or­ders fell by a larger mar­gin than over­all new or­ders,” said Ju­lian Evan­sPritchard, a Sin­ga­pore-based China econ­o­mist at Cap­i­tal Eco­nom­ics.

While China’s for­eign trade faces a mostly pos­i­tive en­vi­ron­ment in the sec­ond half of the year, un­cer­tain­ties still ex­ist, Vice Com­merce Min­is­ter Qian Kem­ing said in Bei­jing yes­ter­day.

The United States and China failed ear­lier this month to agree on ma­jor new steps to re­duce the US trade deficit with China, cast­ing doubt over Pres­i­dent Don­ald Trump’s eco­nomic and se­cu­rity re­la­tions with Bei­jing. Do­mes­ti­cally, the con­struc­tion sec­tor re­mained ro­bust as the gov­ern­ment stepped up in­vest­ment in in­fra­struc­ture projects. Sep­a­rate data showed China’s steel sec­tor in rude health, ex­pand­ing in July at its fastest pace since April 2016. The PMI read­ing on the con­struc­tion sec­tor showed a solid pickup to 62.5 in July from 61.4 in June.

Raw ma­te­rial in­ven­to­ries eased just slightly in July, ac­cord­ing to the sur­vey, while im­ports were al­most steady and sug­gested sta­ble do­mes­tic de­mand. Ac­tiv­ity at large fac­to­ries gath­ered steam in July, with the sub-in­dex for big man­u­fac­tur­ers ris­ing to 52.9 from 52.7. —Reuters

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