Slowdown in China’s manufacturing growth sets tone for New Year


Slowdown in China’s manufacturing growth sets tone for New Year

Nick Beams

3 January 2019

Last year opened to claims that the world economy had entered a period of “synchronised” global growth, after experiencing its best year since the 2008 financial crisis. There was also talk of a “melt up” in US stock markets on the back of major corporate tax cuts at the end of 2017.

It is a very different picture at the start of 2019. Wall Street and global markets have just experienced their worst year in a decade amid growing signs that the world economy has begun a significant slowdown.

The New Year began with the news that a key manufacturing index in China had recorded its worst reading in 19 months—another sign that the Chinese economy is starting to slow. There are fears that it will be further adversely impacted if no trade agreement is reached with the US by the deadline of March 1 and Washington proceeds with its threat to lift tariffs on $200 billion worth of Chinese goods from 10 percent to 25 percent.

The worsening outlook for the Chinese economy was highlighted by the Caixin purchasing managers index (PMI), mainly tracking privately-owned factories, which fell to 49.7 in December from 50.2 in November. It was the first time since May 2017 that the index fell below 50, which marks the line between expansion and contraction.

The data on the private sector were published two days after China’s official PMI, which mainly tracks state-owned corporations, came in at 49.4, the first time it has fallen below 50 since July 2016.

It was significant that in both indexes new orders fell from expansion to contraction between November and December. PMIs in the China-dependent economies of Taiwan, Malaysia and the Philippines have also recorded declines for the month…

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