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China economy

China’s manufacturing sector slows in sign of weakening growth

PUBLISHED : Monday, 30 April, 2018, 11:23am
UPDATED : Monday, 30 April, 2018, 10:34pm

Activity in China’s vast manufacturing sector eased in April as export orders slowed in another sign of ebbing economic growth, while a simmering Sino-US trade row heightened risks for the industrial sector.

The official Purchasing Managers’ Index (PMI) released on Monday fell to 51.4 in April, from 51.5 in March, but remained well above the 50-point mark that separates growth from contraction on a monthly basis. It marked the 21st straight month of expanding business conditions in China.

Analysts surveyed by Reuters had forecast the index would ease slightly to 51.3.

But the softer reading, especially the slower export orders, adds to concerns about an expected loss of momentum in the world’s second-largest economy as policymakers navigate debt risks and a heated trade row with the United States.

China’s once-booming textile and clothing industry faces tough times

“The support to the economy from the easing of pollution controls should now largely have run its course,” said Chang Liu, China economist at Capital Economics in a note to clients.

“Slower growth is likely in the months ahead as the drags on economic activity from weaker credit growth and the cooling property market intensify.”

Beijing is in the third year of a broad effort to curb a dangerous build up of debt across the economy and so far policymakers appear to have successfully steered through the challenge of tempering financial risks without imperilling growth.

The subindex for output remained flat at 53.1, while total new orders eased to 52.9 from 53.3.

The still strong tech sector, which burnished China’s solid exports growth in 2017, could come under pressure as rising tensions between China and the United States threaten to hit billions of dollars in cross-border trade.

Signs of softness in the trade sector were already evident in the latest PMI, with the export orders subindex falling to 50.7 from 51.3.

Speculation is also growing that China is considering shifting its monetary policy to a looser bias as the threat of an all-out trade war with the United States clouds the outlook for key growth drivers of both China’s “old economy” heavy industries and “new economy” tech firms.

Chinese central bank chief says economic fundamentals are strong

The services industry showed “steady development”, the National Bureau of Statistics said in a statement. The official services PMI rose to 54.8 from 54.6 in March, extending a solid run of activity.

The services sector accounts for over half of China’s economy, with rising wages giving Chinese consumers more spending power.

The composite PMI covering both manufacturing and services activity rose to 54.1 in April, from March’s 54, well above the 50-mark that separates expansion from contraction.