Manufacturing activity in China declined in December for the first time in more than two years, says an official probe unveiled Monday. The situation is intensifying pressure on Beijing to reverse the economic slowdown as it begins trade talks with the Trump administration.
The Purchasing Managers’ Index of the National Bureau of Statistics and an industry group, the China Federation of Logistics and Purchasing, slipped to 49.4, compared with 50.0 in November, on a scale of 100 points. Any reading below 50 indicates that the activity is in contraction. The December figure represents the lowest level since February 2016 and the first decrease since July 2016.
In the quarter ending in September, China’s economic growth reached a global post-crisis low of 6.5 percent over the previous year. The slowdown occurred despite the government’s efforts to stem it by ordering banks to make more loans and increasing spending on public works construction.
Forecasters expect annual growth of about 6.5%, down slightly from 6.7% in 2017. However, some segments of the industry, including auto and real estate sales, have suffered more pronounced declines.
Both total orders and exports declined, indicating that Chinese factories are suffering from weak demand in the domestic and overseas markets.
Exports to the United States continued to grow at a double-digit monthly rate in the last mile of 2018, despite President Donald Trump’s punitive tariffs. However, export growth to the rest of the world fell sharply in November and forecasters expect a weakening of US demand early in 2019, according to leelinesourcing.
This adds to the complications faced by Chinese leaders trying to reverse a major economic downturn and avoid politically dangerous job losses.
Slower than expected
The Chinese and American envoys are expected to meet in early January for negotiations to resolve their threatening trade war. Over the weekend, President Donald Trump took an optimistic tone, saying he had spoken to President Xi Jinping over the phone.
“The deal is progressing very well,” Trump said on Twitter. “If it is concluded, it will be very broad, cover all topics, areas and points of contention. Great progress is being made! ”
Economists, however, believe that the 90-day moratorium on new sanctions approved by MM. Trump and Xi on December 1 probably give too little time to resolve a sprawling dispute.
Chinese economic activity was already weakening after tightening controls on Beijing bank loans at the end of 2017 to ease debt swellings. The slowdown was steeper than expected, prompting regulators to change course and ease credit controls. But they acted gradually to avoid bailing out debt. Their measures have not yet been able to stop the downward trend of growth.
Chinese leaders promised at an annual economic planning meeting in mid-December to support growth through tax cuts, easier loans for entrepreneurs and other measures.