Growth slows significantly in China


the official manufacturing purchasing managers index fell to 50.0 in November—the threshold between expansion and contraction. November’s reading is slightly below October’s level and lower than some economists expected.

The reading adds to a picture of a Chinese economy that is slowing broadly—something that President Trump has said puts the U.S. in a stronger position to negotiate concessions from China in their trade battle. Mr. Trump and Chinese President Xi Jinping are set to discuss the trade friction when they meet for dinner Saturday following a summit of the Group of 20 major economies.

The trade trouble—and the U.S. plan to raise tariffs in January to 25%, from 10%—are weighing on growth and business sentiment, making a resolution to the tensions important for China if it is to avoid a sharp downturn, some economists said.

“If China can convince the U.S. to put off the plan to raise tariffs or even put it on hold, I’d call that a success for Beijing,” said Tommy Xie, an economist at OCBC. He said Beijing is likely to hit its 6.5% growth target for this year, given that industrial output and manufacturing investment are still holding up, but higher tariffs would hit businesses hard next year.

Downward pressure on foreign trade has increased in recent months, amid slower global economic growth and the uncertainties created by the trade fight, said Zhao Qinghe, an analyst with the government’s National Statistics Bureau. Recent weakness in some commodities prices also weighed on sentiment, Mr. Zhao said in a statement accompanying Friday’s data release.

Indicators that measure demand for exports and imports remained stuck in contractionary territory for the fifth straight month. While the new export-order subindex ticked up to 47.0 from 46.9, the new import subindex fell to 47.1 from 47.6.

Other measures for production and new orders pointed down too. Outside of manufacturing, weakness in construction outweighed strength in services, dragging the official nonmanufacturing purchasing managers index to 53.4 in November, from 53.9 in October—the lowest level in 15 months.

The soft patch of growth is the worst since mid-2016 when dollops of credit and a real-estate pickup revived the economy. This time around, government efforts to curb risky lending and high corporate debt have combined with tariffs and the threat of a trade war to bring down growth faster than Chinese leaders expected.

This is a noteworthy slowdown. Perhaps we’ll have something to add shortly. Meanwhile, here’s a look at Xi’s G20 team.

Update via WSJ: “The U.S.-China truce over tariffs was greeted with relief across much of Asia as two largest economies eased concerns over a possible a new Cold War.” Cold War??? What kind of nonsense is that?

One Response to “Growth slows significantly in China”

  1. feeblemind Says:

    China’s Worsening Economy Adds Pressure on Xi Heading to G-20

    From the article:

    China’s worsening manufacturing slowdown and uncertainty over the trade war with the U.S. are raising pressure on policy makers to do more to support growth.

    The first official reading of China’s economy in November showed the manufacturing purchasing managers index on the brink of contraction. New export orders contracted for a sixth month while the non-manufacturing gauge, reflecting activity in the construction and services sectors, expanded but at a slower pace.

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