China Engages Monetary Levers
driven by a steady increase in both food and nonfood prices, the expected growth of consumer price index (CPI) for September was 2.5 percent year on year. This is a gain on the August level of 2.3 percent year on year. Upward pressures on price leading up to the Chinese National Day holiday in early October and rising crude oil prices globally also contributed to an upward adjustment in prices. China’s foreign exchange reserves fell by $22.69 billion in September to $3.09 trillion, the biggest drop since February while the value of its gold reserves fell to $70.33 billion at the end of September, from $71.23 billion at the end of August.
China’s Export Orders Hurt by Growing Trade Frictions
Growth in China’s manufacturing sector stalled in September, following 15 months of expansion, as export orders fell the fastest in over two years. The official manufacturing purchasing managers index (PMI) stood at 50.8 in September, compared to 51.3 in August (for reference, a reading of 50 is the dividing line between expansion and contraction). The gauge for new export orders in the manufacturing PMI report fell to 48 from 49.4 in August, the fourth consecutive month of contraction, and the lowest reading since February 2016.
Chinese Makes Strong Efforts to Support Growth
The lack of progress in negotiations between China and the United States over trade tensions suggests that the current roster of tariffs on Chinese exports to the United States, worth $250 billion, is likely to grow. Policy makers in China have therefore shifted their focus inward in recent months toward growth-promoting measures that would enable China to weather the trade storm. Government has sought to bring financing costs down, boost lending to smaller businesses, cut taxes and fasttrack more infrastructure projects. But it will take time for such measures to achieve tangible progress within the slowing economy. China is also persistent in its efforts to stimulate domestic demand to counter the blow from trade shocks.
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