Back in the real world, China-US trade war threats add up to lower growth
The Chinese economy is not about to stall yet but bellwether numbers point to weakening demand from other countries, analysts say
US President Donald Trump’s assault on trade with China is moving from tweeted threats and abortive talks to the real world.
Purchasing manager index readings for June released on Saturday showed a gauge of export orders tumbling into contraction, the clearest sign yet that the oncoming trade war is having a real, negative impact on growth. From this Friday, the world’s two largest economies are set to begin charging higher tariffs on each other’s goods, marking a major escalation of the conflict.
That’s focusing minds among policymakers in Beijing, as China now faces the tricky task of balancing support for an economy that was already slowing with its ongoing desire to curb excess credit. As the increasingly important services sector remains robust, there’s little need to open the stimulus taps too widely for now, provided the nation remains on track to hit the growth target of 6.5 per cent expansion for 2018.
“China’s economy will slow down for the rest of the year, but we don’t need to worry about any stall yet,” said Zhu Qibing, chief macroeconomy analyst at BOC International China in Beijing. “The key is how international trade and the dispute between China and the US will evolve.”
The manufacturing PMI stood at 51.5 in June, versus 51.9 in May, and the forecast of 51.6 in a Bloomberg survey of economists. The non-manufacturing PMI, covering services and construction, rose to 55, compared with 54.9 in May. Levels above 50 indicate improvement.
The sub-index of new export orders fell to 49.8 from 51.2, signalling weakening demand from other countries. Gauges for new orders and the backlog of orders also dropped.