China's industry kicks off in November

Andrew Cummings
December 2, 2019

While China and the US are still thrashing out details of an interim trade deal, Beijing faces the possibility that US President Donald Trump will impose tariffs on more Chinese imports on December 15.

China's National Bureau of Statistics says new data indicates the country's manufacturing sector saw its first expansion in months on climbing overseas orders.

"In the short term, we may have already passed the low point where the economy hit the bottom", Zhang Deli, a macro with Lianxun Securities analyst, wrote in a note.

To help avert a sharper slowdown, China has brought forward 1 trillion yuan (S$194.6 billion) of the 2020 local government special bond quota to this year. Some analysts say that could be a sign that the government is anxious about downward economic pressure.

A sub-index of new export orders climbed to a 7-month high of 48.8, however, it remained in contraction as demand wanes for China's exports overseas.

US President Donald Trump said this week that the world's largest economies are close to reaching agreement on the first phase deal. But trade experts and people close to the White House said it could slide into the new year, given China is pressing for more extensive tariff rollbacks. Additional US duties on Chinese exports are set to kick in on Dec 15. This reflects concerns about the prolonged trade negotiations, and Washington's recent passing of a law supporting human rights and democracy in Hong Kong.

Many Chinese exporters are small and private firms. They PMI index recorded the strongest gain in November, compared with mid-sized companies and large, but they are still the poorest performance of the three in 49.4.

Meanwhile, China's non-manufacturing sector registered faster expansion in November with its PMI at 54.4, up from 52.8 in October, NBS data showed.

The official August composite PMI, which covers both manufacturing and services activity, dropped to 53.0 from July's 53.1.

Hu Yifan, chief China economist of UBS Global Wealth Management, said that the country's consumption remains resilient, and the government is likely to announce more tax and fee cuts to boost consumption in the coming year. Some analysts have also cast doubt over the prospects for robust growth in the construction sector.

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