China’s manufacturers express mixed outlook amid rising optimism of US trade war deal

Smaller Chinese manufacturers expressed a mixed outlook for a rebound in activity and a recovery in export orders amid optimism of a trade deal with the United States.

October’s Caixin/Markit manufacturing purchasing managers’ index (PMI), which surveys 500, mostly smaller private factories, improved for a fourth straight month to 51.7 in October, its highest since reaching the same level in February 2017, and up from 51.4 in September.

This is reflected by an increase in export orders for some firms this year despite the US tariffs, while others said their businesses continued to suffer amid a sharp decline in export demand. In general, producers of high-end products held a more optimistic outlook.

“Actually, our exports to the United States increased by about 13 per cent last year, and our export revenue continued to grow in the first half of this year,” said Chen Wei, deputy general manager of Guangzhou Seagull Kitchen and Bath Products, a large contract manufacturer producing products for brands in the US.

The company, which is listed on the Shenzhen Stock Exchange, was forced to issue statements in April and September last year warning investors that the US tariffs could have a sharp, negative impact on the firm’s revenues, since its US sales accounted for over half of the company’s overseas orders and 35 per cent of the firm’s total revenue.

But one year later, export orders have risen, with US clients optimist for the development of the trade deal.

“Some of our products have been included in the tariff increased by the US government, but these additional costs are mainly borne by US buyers after consultation. That meant American consumers are paying totally unnecessary expenses,” added Chen, who said their clients have been explicitly opposing the increase of tariffs at hearings with the Office of the United States Trade Representative.