China's factory activity contracted more than expected in October to shrink for a second month, hurt by persistently high raw material prices and softer domestic demand, pointing to more economic disquiet in the final quarter of 2021.

China’s falling factory activity a sign of economic woes ahead

China's factory activity showed surprising signs of improvement in November, with growth picking up to a near three-year high, a private sector survey showed on Monday, reinforcing upbeat government data released over the weekend.

But analysts remain concerned about deflationary risks in the sector, unconvinced that the worst is over yet for Chinese manufacturers. They say the sub-indexes of both surveys painted a picture of patchy recovery that will be difficult to sustain.

"The improvement last month was driven by different factors across the two manufacturing indices, making it hard to pinpoint the reason for the apparent uptick industrial activity," Julian Evans-Pritchard, Senior China Economist, wrote in a note on Monday.

"We doubt this marks the start of a decisive rebound inactivity," he said.

The Caixin/Markit manufacturing Purchasing Managers' Index (PMI) index rose to 51.8 in November from 51.7 in the previous month, marking the fastest expansion since December 2016, when it was 51.9.

The 50-mark separates expansion from contraction on a monthly basis.&nbsp;

Total new orders and factory production remained at buoyant levels in November, although they both eased slightly from record highs in the previous month, when they grew the fastest in over six years and nearly three years, respectively.

Larry Hu, Chief China economist at Macquarie Group, cautioned that the improvement could be hit as many one-off tailwinds wear off, such as better sentiment on trade deal and warm weather. Business confidence slipped and companies were reluctant to replenish their inventories, worried about the uncertain outlook for demand and the prolonged <a href="https://www.wionews.com/world/china-wants-us-tariffs-rolled-back-in-phase-one-trade-deal-report-265517">China-US&nbsp;trade war</a>, the survey showed.

China's official factory activity gauge on Saturday also surprised, returning to growth for the first time in seven months as domestic demand picked up in response to stimulus measures. But gains were slight and export orders sluggish.

The official survey focuses more on heavy industry than Caixin's, which is believed to include firms that are more export oriented. The two surveys also cover different geographical areas.

The Caixin survey showed sub-index for new export orders came in at 51, marginally below that in October, when it was the highest since February 2018.

Resilience in the sector led to a notable recovery in the labour market in the month, with companies adding workers for the first time in eight months.

However, profit margins remained under pressure, with input costs continuing to rise while output charges fell, suggesting some firms are still cutting their prices due to fierce competition for sales.

"While growth is likely to stabilise in November, the overall downtrend will continue in months ahead," Hu told Reuters.

The Chinese government has been trying to spur domestic demand for well over a year, largely through higher infrastructure spending and tax cuts, but the measures have been slow to gain traction.

Economic growth cooled to a near 30-year low of 6.0 per cent&nbsp;in the third quarter.

"I think the rebound in headline PMIs may indicate the possibility that <a href="https://www.wionews.com/business-%26-economy/china-economic-growth-slows-to-67-in-second-quarter-151991">China</a> will still be able to achieve above 6 per cent&nbsp;growth rate in 2019," said Betty Wang, senior China economist at ANZ.&nbsp;

"But the price subindices in the manufacturing PMI survey still declined, which suggests the deflationary risk in the manufacturing sector remains."

To help avert a sharper slowdown, China has brought forward 1 trillion yuan&nbsp;of the 2020 local government special bond quota to this year. The bonds are used largely to fund public works.

While China has cut some of its key lending rates in the last few months to reduce corporate financing costs, the reductions have been quite modest. Analysts believe policymakers are reluctant to unleash more aggressive stimulus out of concern it could heighten financial risks and add to a mountain of debt.

Washington and Beijing said in October they were working on a "phase one" trade agreement, but initial market hopes for a quick deal are fading after weeks of conflicting headlines.

A deal could slide into next year as Beijing presses for more extensive tariff rollbacks, and the Trump administration counters with heightened demands of its own.

Highlighting the tension, China's Global Times newspaper said on Sunday that Beijing is demanding Washington removes existing tariffs, not just planned tariffs, as part of the deal, citing sources with direct knowledge of the trade talks.

Additional US&nbsp;duties on Chinese exports are set to kick in on December&nbsp;15.

Months of protests in Chinese-ruled Hong Kong have also exacerbated tensions.

A trade deal has now stalled after the <a href="https://www.wionews.com/world/united-states-house-passes-hong-kong-democracy-act-256310">US&nbsp;passed legislation</a> backing protesters in Hong Kong, news website Axios reported on Sunday, citing a source close to Trump's negotiating team.

China's factory activity showed surprising signs of improvement in November, with growth picking up to a near three-year high, a private sector survey showed on Monday, reinforcing upbeat government data released over the weekend.

China's factory activity showed surprising signs of improvement in November, with growth picking up to a near three-year high, a private sector survey showed on Monday, reinforcing upbeat government data released over the weekend. But analysts remain concerned about deflationary risks in the sector, unconvinced that the worst is over yet for Chinese manufacturers. They say the sub-indexes of both surveys painted a picture of patchy recovery that will be difficult to sustain. "The improvement last month was driven by different factors across the two manufacturing indices, making it hard to pinpoint the reason for the apparent uptick industrial activity," Julian Evans-Pritchard, Senior China Economist, wrote in a note on Monday. "We doubt this marks the start of a decisive rebound inactivity," he said. The Caixin/Markit manufacturing Purchasing Managers' Index (PMI) index rose to 51.8 in November from 51.7 in the previous month, marking the fastest expansion since December 2016, when it was 51.9. The 50-mark separates expansion from contraction on a monthly basis. Total new orders and factory production remained at buoyant levels in November, although they both eased slightly from record highs in the previous month, when they grew the fastest in over six years and nearly three years, respectively. Larry Hu, Chief China economist at Macquarie Group, cautioned that the improvement could be hit as many one-off tailwinds wear off, such as better sentiment on trade deal and warm weather. Business confidence slipped and companies were reluctant to replenish their inventories, worried about the uncertain outlook for demand and the prolonged China-US trade war, the survey showed. China's official factory activity gauge on Saturday also surprised, returning to growth for the first time in seven months as domestic demand picked up in response to stimulus measures. But gains were slight and export orders sluggish. The official survey focuses more on heavy industry than Caixin's, which is believed to include firms that are more export oriented. The two surveys also cover different geographical areas. The Caixin survey showed sub-index for new export orders came in at 51, marginally below that in October, when it was the highest since February 2018. Resilience in the sector led to a notable recovery in the labour market in the month, with companies adding workers for the first time in eight months. However, profit margins remained under pressure, with input costs continuing to rise while output charges fell, suggesting some firms are still cutting their prices due to fierce competition for sales. "While growth is likely to stabilise in November, the overall downtrend will continue in months ahead," Hu told Reuters. The Chinese government has been trying to spur domestic demand for well over a year, largely through higher infrastructure spending and tax cuts, but the measures have been slow to gain traction. Economic growth cooled to a near 30-year low of 6.0 per cent in the third quarter. "I think the rebound in headline PMIs may indicate the possibility that China will still be able to achieve above 6 per cent growth rate in 2019," said Betty Wang, senior China economist at ANZ. "But the price subindices in the manufacturing PMI survey still declined, which suggests the deflationary risk in the manufacturing sector remains." To help avert a sharper slowdown, China has brought forward 1 trillion yuan of the 2020 local government special bond quota to this year. The bonds are used largely to fund public works. While China has cut some of its key lending rates in the last few months to reduce corporate financing costs, the reductions have been quite modest. Analysts believe policymakers are reluctant to unleash more aggressive stimulus out of concern it could heighten financial risks and add to a mountain of debt. Washington and Beijing said in October they were working on a "phase one" trade agreement, but initial market hopes for a quick deal are fading after weeks of conflicting headlines. A deal could slide into next year as Beijing presses for more extensive tariff rollbacks, and the Trump administration counters with heightened demands of its own. Highlighting the tension, China's Global Times newspaper said on Sunday that Beijing is demanding Washington removes existing tariffs, not just planned tariffs, as part of the deal, citing sources with direct knowledge of the trade talks. Additional US duties on Chinese exports are set to kick in on December 15. Months of protests in Chinese-ruled Hong Kong have also exacerbated tensions. A trade deal has now stalled after the US passed legislation backing protesters in Hong Kong, news website Axios reported on Sunday, citing a source close to Trump's negotiating team.

China's factory activity surprises with fastest expansion in three years

China's factory activity shrank more than expected in June, an official manufacturing survey showed, highlighting the need for more economic stimulus as US tariffs and weaker domestic demand ramped up pressure on new orders for goods.

The Purchasing Managers' Index (PMI) stood at 49.4 in June, China's National Bureau of Statistics said on Sunday, unchanged from the previous month and below the 50-point mark that separates growth from contraction on a monthly basis. Analysts polled by Reuters predicted a reading of 49.5.

The weak manufacturing readings are likely to cast a shadow over the apparent progress US and Chinese leaders made at the G20 summit in Japan over the weekend in restarting their troubled talks over tariffs amid a costly trade war.

They will also spark concerns about stalling growth in China and the risk of a global recession, despite slightly better-than-expected export and industrial profits data in May.

Many economists still expect the economy to face strong headwinds in coming months as domestic demand falters and external risks rise.

"Although the outcome of the G20 summit (in Osaka) might boost confidence for some entities, organic growth in the economy is still insufficient, and counter-cyclical stimulus policies need to be maintained," researchers at Huatai Securities wrote in a research note on Sunday.

"The PMI index continued to fall across the board this month, and only the raw material inventory sub-index was up due to weak demand," the research note read.

In June, China's factory output growth slowed, with the subindex falling to 51.3 from 51.7 in May while the contraction in total new orders accelerated to 49.6 from 49.8.

Export orders extended their decline with the sub-index falling to 46.3 from May's 46.5, suggesting a further weakening in global demand.

Import orders also worsened, reflecting softening demand at home despite a flurry of growth-supporting measures rolled out earlier this year.

Southwest Securities said weak new export orders reflected a fading of the front-loading effect, which had temporarily boosted exports as Chinese companies rushed to place orders before more tariffs took effect.

Presidents Donald Trump and Xi Jinping held ice-breaking talks at the G20 summit on Saturday. However, Chinese state media warned on Sunday Beijing and Washington will likely face a long road before the two countries could reach a deal.

Analysts at Nomura expect any gains achieved on a temporary trade deal between China and the United States would prove fleeting with a renewed escalation likely further down the road.

Trump has already imposed tariffs on $250 billion of Chinese goods and is threatening to extend those to another $300 billion, which would effectively cover all of China's exports to the United States. China has retaliated with tariffs on U.S. imports.

To deal with the economic challenges, policymakers have released a range of measures and are expected to launch more. Premier Li Keqiang last week pledged to cut real interest rates on financing for small and micro firms.

Goldman Sachs said the lack of any substantive progress in Sino-U.S. trade talks at the G20 over the weekend suggested stimulus, including cuts to banks' reserve requirements, was likely to be needed.

"We expect more policy easing (two more reserve requirement ratio cuts in 2H this year, more fiscal measures to support infrastructure investment) to come in the next few months," Goldman Sachs said in a note.

&nbsp; &nbsp; Manufacturers continued to cut jobs in June, with the employment sub-index falling to 46.9, compared with 47.0 in May, when it hit the lowest level seen since March 2009.

An official business survey showed activity in China's services sector held firm in June despite growing pressure on the broader economy from U.S. trade measures, with the official reading at 54.2 in June from 54.3 in May.

Beijing has been counting on a strong services sector to pick up the slack as it tries to shift the economy away from a dependence on heavy industry and manufacturing exports.

China's factory activity shrank more than expected in June, an official manufacturing survey showed, highlighting the need for more economic stimulus as US tariffs and weaker domestic demand ramped up pressure on new orders for goods.

China's factory activity shrank more than expected in June, an official manufacturing survey showed, highlighting the need for more economic stimulus as US tariffs and weaker domestic demand ramped up pressure on new orders for goods. The Purchasing Managers' Index (PMI) stood at 49.4 in June, China's National Bureau of Statistics said on Sunday, unchanged from the previous month and below the 50-point mark that separates growth from contraction on a monthly basis. Analysts polled by Reuters predicted a reading of 49.5. The weak manufacturing readings are likely to cast a shadow over the apparent progress US and Chinese leaders made at the G20 summit in Japan over the weekend in restarting their troubled talks over tariffs amid a costly trade war. They will also spark concerns about stalling growth in China and the risk of a global recession, despite slightly better-than-expected export and industrial profits data in May. Many economists still expect the economy to face strong headwinds in coming months as domestic demand falters and external risks rise. "Although the outcome of the G20 summit (in Osaka) might boost confidence for some entities, organic growth in the economy is still insufficient, and counter-cyclical stimulus policies need to be maintained," researchers at Huatai Securities wrote in a research note on Sunday. "The PMI index continued to fall across the board this month, and only the raw material inventory sub-index was up due to weak demand," the research note read. In June, China's factory output growth slowed, with the subindex falling to 51.3 from 51.7 in May while the contraction in total new orders accelerated to 49.6 from 49.8. Export orders extended their decline with the sub-index falling to 46.3 from May's 46.5, suggesting a further weakening in global demand. Import orders also worsened, reflecting softening demand at home despite a flurry of growth-supporting measures rolled out earlier this year. Southwest Securities said weak new export orders reflected a fading of the front-loading effect, which had temporarily boosted exports as Chinese companies rushed to place orders before more tariffs took effect. Presidents Donald Trump and Xi Jinping held ice-breaking talks at the G20 summit on Saturday. However, Chinese state media warned on Sunday Beijing and Washington will likely face a long road before the two countries could reach a deal. Analysts at Nomura expect any gains achieved on a temporary trade deal between China and the United States would prove fleeting with a renewed escalation likely further down the road. Trump has already imposed tariffs on $250 billion of Chinese goods and is threatening to extend those to another $300 billion, which would effectively cover all of China's exports to the United States. China has retaliated with tariffs on U.S. imports. To deal with the economic challenges, policymakers have released a range of measures and are expected to launch more. Premier Li Keqiang last week pledged to cut real interest rates on financing for small and micro firms. Goldman Sachs said the lack of any substantive progress in Sino-U.S. trade talks at the G20 over the weekend suggested stimulus, including cuts to banks' reserve requirements, was likely to be needed. "We expect more policy easing (two more reserve requirement ratio cuts in 2H this year, more fiscal measures to support infrastructure investment) to come in the next few months," Goldman Sachs said in a note. Manufacturers continued to cut jobs in June, with the employment sub-index falling to 46.9, compared with 47.0 in May, when it hit the lowest level seen since March 2009. An official business survey showed activity in China's services sector held firm in June despite growing pressure on the broader economy from U.S. trade measures, with the official reading at 54.2 in June from 54.3 in May. Beijing has been counting on a strong services sector to pick up the slack as it tries to shift the economy away from a dependence on heavy industry and manufacturing exports.

China's factory activity shrinks as US tariffs, slowdown hit orders

Factory activity in China contracted to a three-year low in February as export orders fell at the fastest pace since the global financial crisis, highlighting deepening cracks in an economy facing weak demand at home and abroad.

The gloomy findings are likely to reinforce views that the world's second-largest economy is still losing steam, after growth last year cooled to a nearly 30-year low.

Even with increasing government stimulus to spur activity, concerns are growing that China may be at risk of a sharper slowdown if current <a href="http://www.wionews.com/world/trump-raises-hopes-of-trade-deal-on-final-day-of-us-china-talks-199416">Sino-US trade talks </a>fail to relieve some of the pressure.

The official Purchasing Managers' Index (PMI) fell for the third straight month, dropping to 49.2 in February from 49.5 in January, according to data released by the National Bureau of Statistics (NBS) on Thursday. The 50-mark separates growth from contraction on a monthly basis.

Analysts surveyed by Reuters had forecast the gauge would stay unchanged from January's 49.5.

"Unless the trade war truly turns into an extended truce, the weakening trend may not end quickly," Iris Pang, Greater China economist at ING, said in a note. "As such we expect March's PMI to fall, too."

Manufacturing output contracted in February for the first time since January 2009, during the depths of the global crisis. A breakdown of the survey's findings showed the output sub-index fell to 49.5 from 50.9 the previous month.

Manufacturers also continued to cut jobs, a trend Beijing is closely watching as its weighs more support measures.

New export orders shrank for a ninth straight month, and at a sharper rate, amid faltering global demand. The sub-index fell to 45.2, the lowest since February 2009, from 46.9 in January.

But total new orders -- an indicator of future activity -- edged back into expansionary territory, suggesting some improvement in domestic demand. The sub-index rose to 50.6 from 49.6 in January, after falling for two consecutive months.

However, China watchers typically advise caution over interpreting the country's economic data early in the year because of the timing of the week-long Lunar New Year holidays.

Many firms scale back operations or close for long periods around the holidays, which began on February 4 this year. But workers, business owners and labour activists have told Reuters that companies have shut earlier than usual as the trade war bites, with some likely to close for good.

Ford Motor Co's joint venture in China has quietly begun dismissing thousands of its workers due to weak auto sales in the world’s second-largest economy, the New York Times reported on Wednesday.

Record lending by Chinese banks in January and a sharp rebound in its stock markets have lifted some of the gloom hanging over its economy.

But analysts say it will take months to see if the strong credit impulse translates into improved business activity, assuming companies are borrowing for fresh expansion or investment, not merely refinancing existing debt.

Some economists believe growth could even dip below 6 per cent in the first half -- from 6.4 per cent in the fourth quarter -- before stabilising later in the year as a series of support measures in 2018 and 2019 begin to take effect.

Uncertainty also hangs over ongoing China-US trade talks.

President Donald Trump said on Monday that he may soon sign a deal with Chinese President Xi Jinping to end the countries' trade war, if the two sides can bridge remaining differences

But the lead US negotiator said on Wednesday it was too early to predict the outcome.

US issues with China are "too serious" to be resolved with promises from Beijing to purchase more US goods and any deal between the two countries must include a way to ensure commitments are met, US Trade Representative Robert Lighthizer said.

Growth in China's services industry also cooled in February after rebounding for two straight months, another sign of strain as consumers turn more cautious about spending.

Factory activity in China contracted to a three-year low in February as export orders fell at the fastest pace since the global financial crisis, highlighting deepening cracks in an economy facing weak demand at home and abroad.

Factory activity in China contracted to a three-year low in February as export orders fell at the fastest pace since the global financial crisis, highlighting deepening cracks in an economy facing weak demand at home and abroad. The gloomy findings are likely to reinforce views that the world's second-largest economy is still losing steam, after growth last year cooled to a nearly 30-year low. Even with increasing government stimulus to spur activity, concerns are growing that China may be at risk of a sharper slowdown if current Sino-US trade talks fail to relieve some of the pressure. The official Purchasing Managers' Index (PMI) fell for the third straight month, dropping to 49.2 in February from 49.5 in January, according to data released by the National Bureau of Statistics (NBS) on Thursday. The 50-mark separates growth from contraction on a monthly basis. Analysts surveyed by Reuters had forecast the gauge would stay unchanged from January's 49.5. "Unless the trade war truly turns into an extended truce, the weakening trend may not end quickly," Iris Pang, Greater China economist at ING, said in a note. "As such we expect March's PMI to fall, too." Manufacturing output contracted in February for the first time since January 2009, during the depths of the global crisis. A breakdown of the survey's findings showed the output sub-index fell to 49.5 from 50.9 the previous month. Manufacturers also continued to cut jobs, a trend Beijing is closely watching as its weighs more support measures. New export orders shrank for a ninth straight month, and at a sharper rate, amid faltering global demand. The sub-index fell to 45.2, the lowest since February 2009, from 46.9 in January. But total new orders -- an indicator of future activity -- edged back into expansionary territory, suggesting some improvement in domestic demand. The sub-index rose to 50.6 from 49.6 in January, after falling for two consecutive months. However, China watchers typically advise caution over interpreting the country's economic data early in the year because of the timing of the week-long Lunar New Year holidays. Many firms scale back operations or close for long periods around the holidays, which began on February 4 this year. But workers, business owners and labour activists have told Reuters that companies have shut earlier than usual as the trade war bites, with some likely to close for good. Ford Motor Co's joint venture in China has quietly begun dismissing thousands of its workers due to weak auto sales in the world’s second-largest economy, the New York Times reported on Wednesday. Record lending by Chinese banks in January and a sharp rebound in its stock markets have lifted some of the gloom hanging over its economy. But analysts say it will take months to see if the strong credit impulse translates into improved business activity, assuming companies are borrowing for fresh expansion or investment, not merely refinancing existing debt. Some economists believe growth could even dip below 6 per cent in the first half -- from 6.4 per cent in the fourth quarter -- before stabilising later in the year as a series of support measures in 2018 and 2019 begin to take effect. Uncertainty also hangs over ongoing China-US trade talks. President Donald Trump said on Monday that he may soon sign a deal with Chinese President Xi Jinping to end the countries' trade war, if the two sides can bridge remaining differences But the lead US negotiator said on Wednesday it was too early to predict the outcome. US issues with China are "too serious" to be resolved with promises from Beijing to purchase more US goods and any deal between the two countries must include a way to ensure commitments are met, US Trade Representative Robert Lighthizer said. Growth in China's services industry also cooled in February after rebounding for two straight months, another sign of strain as consumers turn more cautious about spending.

China February factory activity shrinks to three-year low, export orders worst in a decade