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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. [1

9659002] Persistent weakness in China's huge manufacturing sector may lead to expectations that Beijing needs to trigger stimulation faster and more aggressively to weather the biggest decline in decades.

The Buying Managers' Index (PMI) dropped to 49.5 in August, the China National Bureau of Statistics on Saturday, versus 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 15th straight month in August, but at a slower pace, with the sub-index up to 47.2 from July 46.9.

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

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Manufacturers in consumption-oriented industries such car makers such as Geely <0175.HK> and Great Wall <601633.SS> have slashed expectations for sales and profits. " data-reactid = "48"> Manufacturers in consumer-oriented industries that have been particularly vulnerable in the automotive sector. Car manufacturers like Geely <0175.HK> and Great Wall <601633.SS> have lowered sales and profit expectations.

The data showed activity of medium and small sized companies, while 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 sharply weaken days later.

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

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

However, most analysts are keen to end the dispute 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 the 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 consequences of trade uncertainties and slow manufacturing operations.

Despite the higher overall figure, activity in the real estate industry contracted, the statistics agency said in a statement.

The service sector has been supported by the increasing wages and robust spending power of Chinese consumers in recent years. However, the sector softened late last year amid a major downturn.

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


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