China factory growth eases in July

Employees install car components at an assembly line at a Ford manufacturing plant in Chongqing municipality, on April 20, 2012.
Employees install car components at an assembly line at a Ford manufacturing plant in Chongqing municipality, on April 20, 2012. PHOTO: REUTERS

BEIJING • Growth in China's manufacturing sector cooled slightly in July as foreign demand for Chinese goods slackened, but a government-led infrastructure push kept construction humming and helped prop up the world's second-largest economy.

The official Purchasing Managers' Index (PMI) held above the 50-point mark that separates growth from contraction for the 12th straight month, as China poured funds into a construction boom that has fuelled demand for everything from cement to steel and other building materials.

But the broad consensus among China watchers is that economic growth will cool in coming months as a government crackdown on financial risks raises borrowing costs for businesses and squeezes profits.

The official PMI stood at 51.4 last month, the National Bureau of Statistics said yesterday, down from the previous month's 51.7.

Export orders, which helped Chinese factories stage a strong recovery in June, ebbed last month, with manufacturers reporting slackening foreign demand. Overall factory production expanded less quickly compared with June.

New export orders slipped to 50.9 last month from 52.0 in June, helping drag the index for overall factory orders to 52.8 from 53.1.

"The breakdown suggests weaker foreign demand is partly to blame - new export orders fell by a larger margin than overall new orders," said Mr Julian Evans- Pritchard, a Singapore-based economist at Capital Economics.

THE FOREIGN FACTOR

The breakdown suggests weaker foreign demand is partly to blame - new export orders fell by a larger margin than overall new orders.''

MR JULIAN EVANS-PRITCHARD, a Singapore-based economist at Capital Economics, on how export orders, which helped Chinese factories stage a strong recovery in June, ebbed last month, with manufacturers reporting slackening foreign demand.

While foreign trade faces a mostly positive environment in the second half of the year, uncertainties still exist, said Vice-Commerce Minister Qian Keming.

The United States and China failed earlier last month to agree on major new steps to reduce the US trade deficit with China. Domestically, the construction sector remained robust as the government stepped up investment in infrastructure projects.

Separate data showed China's steel sector to be in rude health, expanding last month at its fastest pace since April last year.

The PMI on the construction sector showed a solid pick-up to 62.5 last month from 61.4 in June.

Raw material inventories eased just slightly last month, according to the survey, while imports were almost steady and suggested stable domestic demand. Activity at large factories gathered steam, with the sub-index for big manufacturers rising to 52.9 from 52.7.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 01, 2017, with the headline 'China factory growth eases in July'. Print Edition | Subscribe