China’s factory activity on the slide as trade war escalates
Caixin PMI falls as data showed that export orders shrank for the fifth month in the world’s second-largest economy
The slowdown continues. Manufacturing activity in China increased at a snail-like pace in August, the independent Caixin/Markit Manufacturing Purchasing Managers’ Index has confirmed.
Data from the privately compiled PMI also showed that export orders shrank for the fifth month.
The gloomy numbers reinforced concerns that the world’s second-largest economy is cooling as the trade war with the United States bites, hitting Chinese imports.
On Monday, statistics revealed that the Caixin/Markit PMI fell to 50.6 last month from July’s 50.8. Although the index remained above the 50-point mark, which separates growth from contraction, the figures were the weakest since June 2017.
“The manufacturing sector continued to weaken amid soft demand, even though the supply side was still stable,” Zhengsheng Zhong, the director of Macroeconomic Analysis at CEBM Group, said in a note.
“In addition, the worsening employment situation is likely to have an impact on consumption growth. China’s economy is now facing relatively obvious downward pressure.”
But then, it was already showing signs of stress before the US dispute.
Beijing’s crackdown on financial risks and debt has pushed up borrowing costs and made it tougher for firms to find funding. This, in turn, has sparked a record number of defaults.
Still, this latest survey makes grim reading.
New export orders, which is an indicator of future activity, have contracted for the longest stretch since the first half of 2016, the Caixin/Markit PMI highlighted.
Last month, the sub-index came in at 48.8 compared with 48.4 in July. As a result, total new business, domestic and foreign, was at its weakest level since May 2017.
On Friday, the official PMI survey also showed another month of sliding export orders with President Donald Trump’s administration threatening to slap tariffs on Chinese imports worth US$200 billion as early as this week.
“Growth will probably remain on a downward trajectory well into next year,” Julian Evans-Pritchard, a senior China economist at research firm Capital Economics, wrote in a note to clients.