Sat, Dec 01, 2018 - Page 10 News List

China factory activity softens amid trade dispute

DEMAND DOWN:Goldman Sachs said that Chinese export growth would probably weaken in the next few months and continue to do so unless an agreement is reached


China’s factory activity fizzled last month, official data showed yesterday, in the latest sign that the world’s second-largest economy is losing steam in the midst of a trade spat with the US.

The purchasing managers’ index, a key gauge of factory conditions, was 50.0 for the month, down from 50.2 in October and below forecast, the Chinese National Bureau of Statistics (NBS) said.

Marking the lowest point in more than two years, it is at the level separating expansion from contraction.

New orders declined for a sixth straight month as “production remained steady, while demand expansion slowed down,” NBS analyst Zhao Qinghe (趙清河) said in a statement.

“In terms of economic effects, Chinese export growth will likely weaken in coming months on payback from recent ‘front-loading,’ and — unless a deal is reached — over time by some US substitution to non-Chinese suppliers,” Goldman Sachs Group Inc wrote in a note.

In the short term, US tariffs and the trade dispute would increase uncertainty for Chinese investment and durables consumption, Goldman said.

The data came as Chinese President Xi Jinping (習近平) and US President Donald Trump were due to meet at the G20 summit, which opened in Buenos Aires yesterday and ends today.

Trump is expected to press Xi for wholesale reform of China’s economy in favor of access for US companies, after threatening more tariffs on Chinese imports in January.

Although Trump said he is “very close” to a ceasefire in the trade dispute, this would hardly add much momentum to China’s domestic growth, Capital Economics Ltd senior economist Julian Evans-Pritchard said in a research note.

“With credit growth still on a downward trajectory and regulators yet to unleash off-budget fiscal support, growth is likely to slow further in the coming months,” he said.

China’s economy grew by 6.5 percent in the third quarter, its slowest pace in nine years.

Meanwhile, White House National Trade Council Director Peter Navarro, who has advocated a tough stance against China, is to attend the meeting between Trump and Xi at the G20 summit, an administration official said.

Navarro has sparred with members of Trump’s economic team over how hard to approach China over the trade dispute that has raised tensions between the two world powers.

Additional reporting by Reuters

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