China’s output shows signs of slowdown

Activity at factories continued to expand last month, but the faltering pace raises concerns that manufacturing recovery won’t last

PUBLISHED : Sunday, 02 April, 2017, 12:03am
UPDATED : Sunday, 02 April, 2017, 12:05am

Activity at China’s factories expanded at a softer pace last month, raising concerns a recovery that began late last year may be losing steam amid property curbs and uncertainties over trade with the US.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) for March was 51.2, showing expansion for the ninth straight month, but the figure was below economists’ forecast of 51.6 and was down from February’s 51.7.

The index, a key economic bellwether, was still above the 50 mark, which separates expansion from contraction.

“Overall, the Chinese manufacturing economy continued to improve, but signs of weakening have started to emerge ahead of the second quarter,” said Zhengsheng Zhong, the head of a Caixin think tank.

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“This could even be a turning point leading to growth deceleration, as housing purchase restrictions eased property investment, manufacturing investment cooled and infrastructure investment was contained.”

China’s official PMI survey, released on Friday and focusing more on big, state-owned manufacturers, showed that activity grew at the fastest pace in nearly five years in March. However, a sub-index of the survey showed that smaller companies were still struggling, though conditions improved slightly.

Wu Qiang, the owner of two cement plants in Jiangsu province, said he had seen minor improvements from last year, when China’s economy grew at 6.7 per cent, the slowest pace in decades.

“Cement prices have risen with crude oil, steel, coal and other raw materials since last year. But demand did not recover prominently, as the economic prospects are far from rosy,” Wu said.

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The Caixin/Markit sub-index for export orders showed growth slowing sharply, falling to a three-month low of 51.9 from 53.8 in February.

While China has seen a strong rebound in exports and imports in recent months, the outlook is being clouded by fears of increasing trade friction.

One week ahead of the first meeting of US President Donald Trump and his Chinese counterpart Xi Jinping (習近平) in Florida, Trump signed an executive order on Friday demanding an inquiry into why the US runs trade deficits with some countries.

Its trade deficit with China was US$347 billion last year, the largest in the world.

Additional reporting by Reuters