China fac­tory sec­tor hurt in Septem­ber as trade fric­tions bite

Stabroek News Sunday - - REGIONAL & WORLD NEWS -

BEI­JING, (Reuters) - Growth in China’s fac­tory sec­tor stalled in Septem­ber af­ter 15 months of ex­pan­sion, with ex­port or­ders falling the fastest in over two years, a pri­vate sur­vey showed to­day, sug­gest­ing U.S. tar­iffs are start­ing to in­flict a heav­ier toll on the Chi­nese econ­omy.

A sep­a­rate, of­fi­cial sur­vey con­firmed a fur­ther weak­en­ing in Chi­nese man­u­fac­tur­ing last month, with do­mes­tic and ex­port de­mand also soft­en­ing, though its head­line read­ing still pointed to some growth.

Taken to­gether, the busi­ness ac­tiv­ity gauges - the first ma­jor read­ings on China’s econ­omy for Septem­ber - con­firm con­sen­sus views that the world’s sec­ond­largest econ­omy is con­tin­u­ing to cool, which is likely to prompt Chi­nese pol­i­cy­mak­ers to roll out more growth sup­port mea­sures in com­ing months.

The Caixin/Markit Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex (PMI) for Septem­ber fell more than ex­pected to 50.0 from 50.6 in Au­gust. Econ­o­mists polled by Reuters had fore­cast a read­ing of 50.5 on av­er­age.

The neu­tral 50-mark di­vides ex­pan­sion from con­trac­tion on a monthly ba­sis. Septem­ber was the first time China’s fac­to­ries had not seen busi­ness im­prove since May 2017, when ac­tiv­ity con­tracted.

New ex­port or­ders - an in­di­ca­tor of fu­ture ac­tiv­ity - shrank at the fastest pace since Fe­bru­ary 2016, with com­pa­nies at­tribut­ing the shrink­ing or­ders to trade fric­tions and sub­se­quent tar­iffs.

“Ex­pan­sion across the man­u­fac­tur­ing sec­tor weak­ened in Septem­ber, as ex­ports in­creas­ingly dragged down per­for­mance and con­tin­ued soft­en­ing de­mand be­gan to have an im­pact on com­pa­nies’ pro­duc­tion,” said Zheng­sheng Zhong, di­rec­tor of macroe­co­nomic anal­y­sis at CEBM Group. “Down­ward pres­sure on China’s econ­omy was sig­nif­i­cant,” said Zhong.

LONG FIGHT AHEAD

The Trump ad­min­is­tra­tion has pointed to grow­ing signs of eco­nomic weak­ness in China and its slump­ing stock mar­kets as proof that the United States is win­ning the trade war, but Bei­jing has re­mained de­fi­ant, vow­ing to stim­u­late do­mes­tic de­mand to cush­ion the blow from any trade shocks.

Wash­ing­ton slapped tar­iffs on $200 bil­lion worth of Chi­nese goods on Sept. 24 and is threat­en­ing to im­pose du­ties on vir­tu­ally all of the goods China ex­ports to the United States.

Plans for fresh trade talks col­lapsed in re­cent weeks, and both sides ap­pear to be dig­ging in for a long fight, cast­ing a pall over the out­look for global eco­nomic growth.

The of­fi­cial Pur­chas­ing Man­agers’ In­dex (PMI), re­leased by the Na­tional Bureau of Statis­tics on Sun­day, fell to a 7month low of 50.8 in Septem­ber from 51.3 in Au­gust, but re­mained above the 50point mark sep­a­rat­ing growth from con­trac­tion for the 26th straight month.

An­a­lysts sur­veyed by Reuters had fore­cast the read­ing would ease to 51.2.

New ex­port or­ders, an in­di­ca­tor of fu­ture ac­tiv­ity, con­tracted for a fourth straight month, with the sub-in­dex falling to 48.0 from 49.4 in Au­gust.

HIGHER SER­VICE SEC­TOR READ­ING

A sis­ter sur­vey of the of­fi­cial one showed stronger read­ing in Septem­ber for ser­vices, which rose to 54.9 from 54.2 the pre­vi­ous month.

That of­fers some cush­ion­ing for the slow­ing econ­omy as the ser­vices sec­tor ac­counts for more than half of China’s econ­omy, with ris­ing wages giv­ing con­sumers more spend­ing power.

While China’s of­fi­cial ex­port data has proved sur­pris­ingly re­silient so far, many an­a­lysts be­lieve com­pa­nies have been rush­ing out ship­ments to the United States to beat suc­ces­sive rounds of tar­iffs, rais­ing the risk of a sharp drop off once du­ties are ac­tu­ally im­posed. The deep­en­ing slump in ex­port or­ders may be bear­ing that the­ory out.

Ex­port-re­liant Chi­nese cities and prov­inces are al­ready show­ing the strain. Guang­dong, China’s big­gest prov­ince by gross do­mes­tic prod­uct, re­ported a drop in ex­ports in the first eight months from a year ear­lier.

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