BEIJING: China’s factory activity shrank for the third month in a row in July, an official survey showed, underlining the growing strains on the world’s second-biggest economy as the Sino-US trade war hits business profits, confidence and investment.
Wednesday’s weak manufacturing reading adds to global growth risks and explains why policymakers around the world have stepped up easing measures, with some others considering doing so soon, to counter the fallout from international trade frictions.
The Purchasing Managers’ Index (PMI) rose to 49.7 in July, from the previous month’s 49.4, China’s National Bureau of Statistics said on Wednesday, but remained below the 50-point mark that separates growth from contraction on a monthly basis. Analysts polled by Reuters had predicted a reading of 49.6.
Deteriorating global demand saw export orders shrinking for the 14th month, the survey showed, though the sub-index ticked up fractionally to 46.9 from June’s 46.3.
The contraction in total new orders also moderated slightly, while factory output offered one brighter note, with growth quickening this month.
The official gauge came on the second day of US and Chinese trade negotiators’ meeting in Shanghai, their first in-person talks since a G20 truce last month, though expectations for progress remain low. “We expect that this downward trend in manufacturing will continue in 2019 until the trade and technology negotiations make some progress,” said Iris Pang, ING’s Greater China economist.
In a row that has dragged on for more than a year, the world’s two largest economies have slapped billions of dollars of tariffs on each other’s imports, disrupting global supply chains and shaking financial markets. That has prompted central banks from South Korea to Australia to South Africa to cut rates, with the US Federal Reserve also widely expected to ease later on Wednesday for the first time since the global financial crisis.
— Reuters
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