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China economy

China’s trade war-hit economy set to slow for seventh straight month in December: Bloomberg report

  • Bloomberg Economics gauge suggests Beijing government’s stimulus approach and the US trade war truce have yet to have much effect
  • Official data for December, the purchasing managers’ indexes for the manufacturing and non-manufacturing sectors, will be released on Monday in Beijing
PUBLISHED : Friday, 28 December, 2018, 1:31pm
UPDATED : Friday, 28 December, 2018, 2:16pm

China’s economy slowed for a seventh straight month in December as the trade war with the United States, subdued domestic demand and decelerating factory inflation combined to undercut growth, according to a Bloomberg Economics gauge.

The Bloomberg Economics gauge aggregates the earliest available indicators on business conditions and market sentiment.

The data suggest the government’s stimulus approach and the trade war truce with the US have yet to have much effect on the nation’s growth trajectory.

The data signals that activity is continuing to slow, with uncertainties in global trade and sluggish confidence still the major constraints, said David Qu, economist at Bloomberg Economics.

“Recent fluctuation in the commodity market may further undermine manufacturing sector profitability,” and we will be looking closely at what the government does to stabilise the economy in early 2019, he said.

China’s leadership last week pledged more support for the economy in 2019, indicating an increasing sense of concern in Beijing over the economy and stalling growth.

Even with the current 90-day ceasefire for the trade war agreed on December 1, there is still no guarantee that there will be a breakthrough before the start of March, when the current truce is set to end.

The first official Chinese economic data for December, the purchasing managers’ indices for the manufacturing and non-manufacturing sectors, will be released on Monday morning in Beijing.

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The manufacturing gauge will probably be unchanged at 50, the dividing line between expansion and contraction. Before November, the last time it was so low was mid-2016.

The non-manufacturing gauge, which covers construction and services, is forecast to slip slightly, according to the Bloomberg survey.

China’s manufacturing companies are already under pressure with output growing at the slowest rate in a decade in November and factory inflation decelerating.

If the current trade talks fail, higher US tariffs would further damage their prospects.

Outside the trade ceasefire, companies have had little good news to embrace. An index of business confidence among small and mid-sized enterprises (SMEs) maintained by Standard Chartered was unchanged at 54.7 in December, and the outlook is bleak as downward pressures continues to mount, according to Shen Lan, the Beijing-based economist in charge of the bank’s survey.

“Export demand weakened while domestic demand remained sluggish for SMEs in December,” she said in a December 24 report.

The acceleration in production was driven mainly by the non-manufacturing and hi-tech industries, while manufacturing slowed further, she wrote.

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“Credit conditions generally improved in the fourth quarter, although they did not show further improvement in December,” she added.

Data from China’s major trading partners supports Shen’s point about waning external tailwinds. The weighted average of the flash PMI readings of nations including the US, the European Union and Japan moderated for an eighth straight month in December. Though still in expansion territory, it was the lowest level in two years.

China’s stock market has had one of its worst years in 2018 and accelerated the tumble in the final month.

The benchmark Shanghai Composite Index is nearly 25 per cent below where it started this year, making it the worst-performing major stock market in the world.

Prices of commodities reflected the weakness, with copper falling in December and iron ore trading lower than November’s highs.