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Home / Business / China's factory activity shrinks for the fourth month as trade pressure is mounted

China's factory activity shrinks for the fourth month as trade pressure is mounted



BEIJING (Reuters) – China's factory activity shrank in August for the fourth consecutive month as the United States increased trade pressure and domestic demand remained slow, pointing to a further slowdown in the world's second-largest economy. [19659002] Persistent weakness in China's huge manufacturing sector may cause expectations that Beijing needs to trigger stimulus faster and more aggressively to weather the biggest decline in decades.

Purchasing Leaders Index (PMI) dropped to 49.5 in August, the China National Bureau of Statistics said on Saturday, against 49.7 in July, below the 50-point mark that separates growth from contraction on a monthly basis.

A Reuters survey found that analysts expected the PMI for August to remain unchanged from last month.

The official factory meter showed increasing trade frictions with the US and cooling global demand continued to destroy China's exporters.

Export orders fell for the 1

5th straight month in August, but at a slower pace, with the sub-index up to 47.2 from July 46.9.

Total new orders – from home and abroad – also continued to fall, indicating domestic demand remains soft, despite numerous growth measures over the past year.

Manufacturers in consumer-oriented industries such as the automotive sector have been particularly exposed. Carmakers like Geely <0175.HK> and Great Wall <601633.SS> have lowered sales and profit expectations.

The data showed activity of medium and small large firms, even as large manufacturers, many government-supported, managed to expand in August.

The factories continued to throw jobs in August amid uncertain business prospects. The sub-index for employment fell to 46.9, compared with 47.1 in July.

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August saw dramatic escalations in the bitter year-long Sino-US trade series, with President Donald Trump announcing early this month that he would impose new tariffs on Chinese goods from September 1, and China laid its yuan currencies greatly weakened days later.

After Beijing rebounded with recurring tariffs, Trump said that existing fees would also be raised in the coming months. The overall moves now effectively cover all of China's exports to the United States.

Both sides hinted this week that they are discussing a new round of face-to-face next month, raising hopes that there is still room for an escalation.

Trump said on Monday that China wants to reach a "very bad" deal, citing what he described as increasing financial pressure on Beijing and job losses.

But most analysts are in deep doubt about an end to the dispute anytime soon, and some have recently cut growth forecasts for China in the coming quarters.

Growth in China's service sector activity increased for the first time in five months in August, with official figures from a separate business survey rising to 53.8 from 53.7 in August.

Beijing has relied on a strong service sector to mitigate some of the economic impact of trade uncertainties and slow manufacturing activity. [19659002] Despite a higher overall figure, the activity in the real estate industry declined, the statistics agency said in a statement.

The service sector has been boosted by Chinese consumers' rising wages and robust spending power in recent years. However, the sector softened late last year amid a broader decline.

(Reporting by Roxanne Liu and Dominique Patton; Editing by Clarence Fernandez)


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