China’s manufacturing activity fell to a two-year low last month as domestic demand weakened, an official measure showed yesterday, adding to pressure on Beijing to shore up economic growth amid a tariff spat with Washington.
The Purchasing Managers’ Index (PMI) of the Chinese National Bureau of Statistics (NBS) and an industry group, the China Federation of Logistics and Purchasing, fell to 50.2 from September’s 50.8 on a 100-point scale on which numbers above 50 show activity expanding.
Export orders weakened, but the biggest effect was from cooling domestic demand. Auto and real-estate sales have slumped since Beijing tightened lending controls last year to rein in a debt boom.
“Short-term downward economic pressure is relatively large,” economist Zhang Liqun (張立群) said in a statement released with the PMI.
Beijing needs to cut taxes, ease lending curbs and take other steps to “boost confidence in China’s private sector,” Citigroup economists said in a report.
Chinese exports to the US have been unexpectedly resilient since US President Donald Trump’s first tariff hikes took effect in July in a battle over Beijing’s technology policy.
Some of that is due to exporters rushing to fill orders ahead of duty increases, but producers of higher-value-added goods such as factory and medical equipment have expressed confidence they can keep their US market share even with higher prices.
The monthly measure for new orders tumbled 1.2 points to 50.8, NBS and the logistics federation said.
The new export order index declined 1.1 points to 46.9.
Exports to the US have risen by at least 13 percent over a year earlier each month since Trump’s first tariff hikes.
The tariff effect “could become more material” if companies start to shift supply chains out of China to avoid higher US charges, the Citigroup economists said.
China’s US$12 trillion-a-year economy was already cooling as communist leaders tried to steer it toward more self-sustaining growth based on domestic consumption instead of exports and investment.
Economic growth in the three months ending in September slipped to 6.5 percent over a year earlier from the previous quarter’s 6.7 percent. It was the slowest rate since early 2009 during the global financial crisis.
The relative strength of China’s economy has allowed Chinese President Xi Jinping’s (習近平) government to reject pressure for changes in initiatives such as “Made in China 2025” that call for the state-led creation of champions in robotics and other technologies.
Beijing tightened lending controls last year to rein in surging debt, but the downturn was unexpectedly abrupt, prompting the ruling party to reverse course and pump money into the economy by easing lending controls and boosting government spending on public works.
Such support “has yet to fully offset broader downward pressure,” Capital Economics senior China economist Julian Evans-Pritchard said.
Beijing would need to ease credit controls and step up spending to “help put a floor beneath growth,” he said.
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