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Home / Business / Asia's factory activity shrinks, US-China trade weapons fail to brighten the prospects of Reuters

Asia's factory activity shrinks, US-China trade weapons fail to brighten the prospects of Reuters



© Reuters. FILE PHOTO: An employee works at Maanshan Steel and iron factory in Hefei

By Playing Kihara

TOKYO (Reuters) – Factory activity declined in most Asian countries in June, when the unifying trade conflict between the United States and China put further strain on The production survey followed the group's summit in Osaka, Japan, where leaders on Saturday warned to slow down global growth and intensify geopolitical and trade tensions.

The United States and China agreed at the summit to start the trade negotiations after President Donald Trump offered concessions, including no new tariffs and a relief of restrictions on the technology firm Huawei, which facilitates business and financial markets. 1

9659004] But analysts doubt that ceasefire will lead to sustained tension relief, while long-term uncertainty can curb corporate spending appetite and global growth.

"It's too early to be optimistic. The two countries have just kicked the jug down the road, and nobody knows what can happen next," said Yoshiki Shinke, chief economist at the Dai-ichi Life Research Institute in Tokyo. 19659004] "Global production activity has not yet hit the bottom yet. US confidence in the business world, especially the manufacturers, has weakened, and if this continues, it can damage economies worldwide. "

In China, Asia's economic engine, the Caixin / Markit Manufacturing Purchasing Managers Index (PMI) came in at 49.4, which was not in line with market expectations and the worst reading since January.

That was the first time in four months that the keenly-watched index has fallen below the neutral 50-degree dividend expansion from the monthly contraction, 19659004] Japan also saw production activity contracts in June to hit a low level and provide a new proof of an economy below the pump Whatever the global demand is weakening.

A study by the Bank of Japan (BOJ) revealed itself that major manufacturers' self-confidence hit a close to three-year low and kept the central bank under pressure to maintain or even ramp up a massive stimulus program.

In South Korea, factory activity at the fastest pace for four months in June as the global trend slowed down, forcing companies r to cut production and throw more jobs.

Production activity also fell in Malaysia and Taiwan, indicating that US and China trade conflicts were affected by the rest of Asia.

US-China trade war has harmed business sentiment, threatened to disrupt supply chains and skewed financial markets and warn policy makers of the growing decline in the world economy.

The International Monetary Fund's CEO Christine Lagarde welcomed the resumption of trade negotiations between the two countries, but warned that more must be done to revive a global economy that had already hit a "rough patch".

Higher concerns about global growth have forced some Asian central banks, such as those in Australia, New Zealand and India, to cut interest rates.

While G20 leaders said they were ready to take further steps to promote growth, many major economies have little fiscal and monetary space to fight another recession.

Expectations of a rate cut in the US Federal Reserve have put pressure on the European Central Bank and the BOJ to follow, despite their dwindling opportunities for arresting stalls.

"If Fed cuts prices, the BOJ and the ECB have to do something stronger to contain currency increases, say Sayuri Shirai, a former BOJ policeman currently professor of Japan's Keio University.


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