Northwest Arkansas Democrat-Gazette
Chinese factory activity slackens
HONG KONG — Chinese manufacturing activity fell to its lowest level in more than six years in the latest sign of the slowdown in the world’s second-biggest economy, according to a survey released Wednesday.
The latest data were worse than economists had expected and unsettled global financial markets. Uncertainty about the extent of China’s slowdown has been on the radar of investors, particularly after the Federal Reserve mentioned China as one of its reasons for not raising interest rates last week.
The preliminary Caixin/Markit index, which is based on a survey of factory purchasing managers, fell to 47.0 in September from 47.3 in August. Numbers below 50 on the 100-point index indicate contraction.
It’s the sixth straight monthly decline for the index, which is at its low-
est level since March 2009, when the world was gripped by the fallout from the global financial crisis. The preliminary index reading is based on 85 percent of survey respondents. The final figure, which is often revised, is due by Oct. 1.
Excess capacity “across a number of industries, as well as demand weakness, both domestically and externally, remain the major challenges faced by the manufacturing sectors,” Grace Ng, a greater China economist at JPMorgan Chase & Co. in Hong Kong, wrote in a report. She said the level of supplies of finished products, which rose to the second-highest level in the survey’s history, “points to further drag on industrial activity in the near term.”
Activity may have been weighed down by temporary factory closures and a twoday national holiday for a military parade in Beijing in early September, analysts said.
China’s factories cut output, staff numbers and prices at a faster pace as both new export orders and overall new orders fell, the report said. Chinese manufacturers employ many millions of workers and represent a big part of the overall economy but they are feeling the effects of a weak recovery in major markets overseas.
“Today’s data highlights the considerable head winds to growth from soft global demand,” said HSBC Greater China Economist Julia Wang.
The data will add to the pressure on China’s Communist leaders as they try to prevent growth from falling too sharply. Service industries have been growing rapidly, but economists say China may still need to speed up government spending to achieve the full-year growth target of 7 percent.
China said its economic growth held steady at 7 percent in the most recent quarter, which was its weakest performance since 2008.
Growth has fallen from the double-digit rates of the previous decade as the government tries to wean the economy off its reliance on trade and investment in favor of domestic spending on goods and services, but the transition is challenging.
Policymakers in Beijing have cut interest rates five times since November and also lowered bank reserve requirement ratios in a bid to bolster economic growth.
“The decline indicates the nation’s manufacturing industry has reached a crucial stage in the structural transformation process,” said He Fan, chief economist of Caixin Insight Group.
Chinese President Xi Jinping arrived in Seattle on Tuesday for his first state visit to the U.S. that was frontloaded with meetings with U.S. business executives. He is to meet President Barack Obama tonight at the White House.
On Wednesday, Xi spoke to some of the top names in Chinese and American business. Apple Chief Executive Tim Cook, Microsoft Chief Executive Off icer Satya Nadella, Amazon founder Jeff Bezos, billionaire investor Warren Buffett and Jack Ma of Chinese e-commerce giant Alibaba were among the 30 executives at a private discussion moderated by former U.S. Treasury Secretary Henry Paulson.
Paulson was an early proponent of a new treaty to provide a framework for broader investment between China and the United States. All of the American CEOs participating in Wednesday’s meeting signed a letter to Xi and Obama urging them to support such an agreement.
In a speech Tuesday evening, the Chinese president spoke about a variety of issues, including the need for a bilateral investment deal.
Xi told dignitaries such as former U.S. Secretary of State Henry Kissinger, Paulson and Commerce Secretary Penny Pritzker that reaching agreements to ensure continued robust international trade was a top priority.
“China will never close its open door to the outside world,” Xi said, according to a translation of his remarks.