Manufacturing Activity in China Is Contracting

According to the latest reports, as of December end, the manufacturing activity in China is contracting at an unexpected level. It should be noted that the same has not happened in the last two years. Currently, it has been caused by the ongoing trade disputes between China and the United States. The economic slowdown, which was contributed by the trade-war, has played an important role in this contraction.

There were earlier predictions that the manufacturing activity in China would be at stake. In fact, according to a poll conducted by Reuters, analysts agreed that the number would reach 49.9. However, according to the data published by Chinese National Bureau of Statistics, Purchasing Managers’ Index has hit a record-time low of 49.4. This difference means a lot to the Chinese economy, which is gradually slowing down.

Ever since the trade-war between the US started, Chinese economy has been witnessing one of the deadliest declines. For instance, in November, the PMI had hit a record of 50. 50 on PMI meant that the sector was at an idle stage — neither at expansion nor at contraction. Now that the numbers have come down to 49.4, it means the Chinese manufacturing sector is facing a contraction.

It should be noted that the manufacturing industry is facing most of the problem. The Purchasing Managers’ Index from non-manufacturing sector has actually improved in the last month — when it was increased to a 53.8 from November’s 53.4. It means that there is a rebalancing of the economy that is happening in China, which seems to move towards more consumerism.

As far as the trade-war is concerned, the US and China has come to a truce, and a 90-day grace period is now going on while both parties would be trying to reconcile. As a part of the move, a major tariff was delayed.