Fri, Mar 01, 2019 page10

• Chinese factory activity shrinks, exports decline

  • Reuters, BEIJING
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  Factory activity in China last month contracted to a three-year low as export orders fell at the fastest pace since the global financial crisis, highlighting deepening cracks in an economy facing weak demand at home and abroad.

  The gloomy findings are likely to reinforce views that the world’s second-largest economy is still losing steam, after growth last year cooled to a near 30-year low.

  Even with increasing Chinese government stimulus to spur activity, concerns are growing that China might be at risk of a sharper slowdown if trade talks with the US fail to relieve some of the pressure.

  

  A worker cuts a pipe at a factory in Qingdao, China, yesterday.

  Photo: AFP

  The official Purchasing Managers’ Index (PMI) fell to 49.2 last month from 49.5 in January, pointing to a contraction in activity for the third straight month, according to data released by the Chinese National Bureau of Statistics yesterday.

  The 50 mark separates growth from contraction on a monthly basis.

  Analysts had forecast the manufacturing gauge would stay unchanged from January’s 49.5. China’s factory activity has been generally softening since May last year.

  “Unless the trade war truly turns into an extended truce, the weakening trend may not end quickly,” Iris Pang (彭藹嬈), Greater China economist at ING in Shanghai, said in a note. “As such we expect March’s PMI to fall, too.”

  Manufacturing output contracted last month for the first time since January 2009, during the depths of the global crisis. A breakdown of the survey’s findings showed the output subindex fell to 49.5 from 50.9 the previous month.

  Manufacturers continued to cut jobs more aggressively, a trend Beijing is closely watching as its weighs more support measures. The pace of job-shedding was the fastest since December 2015.

  New export orders shrank for a ninth straight month and at a sharper rate, in the latest sign of deteriorating global demand. The subindex fell to 45.2, the lowest since February 2009, from 46.9 in January.

  However, total new orders — an indicator of future activity — edged back into expansionary territory, suggesting some improvement in domestic demand. The subindex rose to 50.6 from 49.6 in January, after falling for two consecutive months.

  China watchers typically advise caution over interpreting the country’s economic data early in the year because of the timing of the week-long Lunar New Year holiday.

  Many firms scale back operations or close for long periods around the holidays, which began on Feb. 4 this year.

  However, workers, business owners and labor rights advocates have said that companies have shut earlier than usual as the trade dispute bites, with some likely to close for good.

  Ford Motor Co’s joint venture in China has quietly begun dismissing thousands of its workers due to weak auto sales in the world’s second-largest economy, the New York Times reported on Wednesday.

  Record lending by Chinese banks in January and a sharp rebound in its stock markets have lifted some of the gloom hanging over the economy.

  However, analysts say it will take months to see whether the strong credit impulse translates into improved business activity, assuming companies are borrowing for fresh expansion or investment, not merely refinancing existing debt.

  The PMI survey showed that smaller firms were still bearing the brunt of the pressure while large firms — many of them state-owned enterprises — stayed afloat, despite targeted policy measures to help struggling private firms refinance and increase capacity.

  Some economists say that China’s economic growth could even dip below 6 percent in the first half — from 6.4 percent in the fourth quarter last year — before stabilizing later in the year as a series of support measures last year and this year begin to take effect.

  “The cooling property sector, the end of the durable-goods replacement cycle and the payback effect from the previous front-loading of exports have been and will remain headwinds,” Ting Lu (陸挺), chief China economist at Nomura in Hong Kong, wrote in a note.

  Growth in China’s services industry also cooled last month after rebounding for two straight months as new orders rose at a slower pace, another sign of strain as consumers turn more cautious about spending.

  Services growth was mainly dragged by a notable slowdown in construction activity, suggesting recent fiscal stimulus through more bond issuance has not been reflected in infrastructure investment.

  The subindex fell nearly 2 percentage points to 59.2.
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