China man­u­fac­tur­ing shrinks

The Myanmar Times - - International Business -

CHINA’S man­u­fac­tur­ing shrank in July, the gov­ern­ment said yes­ter­day, blam­ing the de­te­ri­o­ra­tion on rain­storms that wreaked havoc across large swathes of the coun­try.

It was the first time since Fe­bru­ary the of­fi­cial pur­chas­ing man­agers’ index (PMI) showed con­trac­tion, and ac­cord­ing to a Bloomberg News sur­vey it missed economists’ ex­pec­ta­tions it would flat­line.

The of­fi­cial PMI came in at 49.9 for July, down from 50.0 the month be­fore and un­der­lin­ing prob­lems in the world’s sec­ond-largest econ­omy.

A read­ing above 50 sig­nals ex­pand­ing ac­tiv­ity, while any­thing be­low in­di­cates shrink­age.

The Na­tional Bureau of Statis­tics at­trib­uted the slow­down to sum­mer down­pours, which hit the in­dus­try­heavy mid­dle and lower reaches of the Yangtze River par­tic­u­larly hard.

“Pro­duc­tion and trans­porta­tion of rel­e­vant ar­eas were mas­sively im­pacted,” said NBS an­a­lyst Zhao Qinghe, adding that slow­ing ex­pan­sion and over­ca­pac­ity also dragged.

In­vestors watch the PMI fig­ures closely as the first read­ing on the health of the econ­omy each month.

The key man­u­fac­tur­ing sec­tor has been strug­gling for months in the face of sag­ging global demand for Chi­nese prod­ucts and ex­cess in­dus­trial ca­pac­ity left over from the coun­try’s in­fra­struc­ture boom.

ANZ economists said July’s fig­ures “do not bode well” for China’s eco­nomic growth in the sec­ond half of the year.

“The tra­di­tional man­u­fac­tur­ing sec­tor is likely to con­tinue to face strong head­winds as ef­forts to re­duce over­ca­pac­ity con­tinue,” they said.

China is a vi­tal driver of global growth, but its econ­omy ex­panded only 6.9 per­cent in 2015 – its weak­est rate in a quar­ter of a cen­tury – and has slowed fur­ther this year.

Bei­jing has said it wants to re­ori­ent the econ­omy away from re­ly­ing on debt-fu­elled in­vest­ment to boost growth and to­wards a con­sumer­driven model, but the tran­si­tion has proven chal­leng­ing.

Unusu­ally, the pri­vate Caixin Pur­chas­ing Man­agers’ Index, which fo­cuses on small com­pa­nies, was more pos­i­tive than the of­fi­cial fig­ure.

Its read­ing jumped to 50.6 in July from 48.6 in June – the first ex­pan­sion since Fe­bru­ary 2015 – the Chi­nese fi­nan­cial mag­a­zine said.

Its sub-in­dexes for out­put, new or­ders and buy­ing ac­tiv­ity all re­turned to growth on “stronger do­mes­tic demand,” even though ex­port sales de­clined marginally.

“This in­di­cates that the Chi­nese econ­omy has be­gun to show signs of sta­bil­is­ing due to the grad­ual im­ple­men­ta­tion of proac­tive fis­cal pol­icy,” Caixin an­a­lyst Zhong Zheng­sheng said in the state­ment.

“The pres­sure on growth re­mains, and sup­port­ive fis­cal and mone­tary poli­cies must be con­tin­ued.”

While the of­fi­cial PMI pointed to soft­ened mo­men­tum in man­u­fac­tur­ing, the NBS’ read­ing for the ser­vice sec­tor showed con­tin­ued strength, reach­ing 53.9 in July, the high­est in seven months. –

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