Worries of a deepening China economic slowdown intensified yesterday after a private survey showed the factory sector shrank at its fastest rate in almost six-and-half years this month, hammering global stocks and commodity prices.
The gloomy figure sent investors fleeing for cover in gold and bonds, fearing China’s sagging economy would translate into slower global growth and muddy the outlook for the timing of the first US interest rate hike in nearly a decade.
World markets had already been on edge after China’s surprise devaluation of the yuan last week and a near-collapse in its stock markets in early summer.
Photo: AFP
“Uncertainty about China growth is now the main swing factor in markets,” Singapore-based ING Group economist Tim Condon said. “Today’s data reinforced the doubts about global growth.”
The preliminary Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) stood at 47.1 this month, well below a Reuters poll median of 47.7 and down from last month’s final 47.8.
It was the worst reading since March 2009, in the depths of the global financial crisis, and the sixth straight one below the 50-point level, which separates growth in activity from contraction on a monthly basis.
The downdraft from China is rattling economies of its trade- reliant Asian neighbors and prompting many Western companies to reduce investments and look for ways to cut costs.
South Korea, which counts China as its biggest trading partner, yesterday said its exports slumped nearly 12 percent in the first 20 days of this month from a year ago.
Taiwan reported on Thursday that its export orders last month fell more than expected, with a 14.1 percent slump in orders from China and smaller declines from Japan and Europe, leaving the US as the lone bright spot.
While a similar factory survey in Japan pointed to a pick-up in activity there due to stronger domestic demand, policymakers in Tokyo are keenly aware of the dangers if China slows further.
The flash PMIs are the earliest activity measure to be released on global economies each month, and are closely followed by investors. Similar surveys were due to be released in Europe and the US later yesterday, and disappointing readings could spark further market mayhem.
US stock futures fell sharply after China’s PMI report and most Asian stock markets and the Australian dollar extended early losses. Overnight on Wall Street, the S&P 500 sank to a more than six-month low on concerns about how China’s slowdown would impact US firms’ earnings and global growth.
Analysts still expect the US central bank to raise interest rates later this year, though minutes from the US Federal Reserve’s last meeting in July showed policymakers discussed China, Greece’s debt crisis and the weak state of the global economy.
A detailed breakdown of China’s PMI survey showed conditions deteriorating on almost every level this month. Factory output sank to a near four-year low as firms laid off more workers, while domestic and export orders fell at a faster rate than last month.
Following three decades of blistering double-digit economic growth, Chinese authorities have had limited success in shoring up activity this year, despite four interest rates cuts since November last year.
Worse, last week’s shock 2 percent devaluation in the yuan and a near-collapse in Chinese shares over the summer that was countered by a massive stock market rescue do not appear to have calmed investor jitters.
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure
RSS