Growth in China’s manufacturing sector has slowed to its lowest level in more than a year in August, in the face of trade war anxiety and worries over the global economy.
With export orders shrank in August, for the fifth month in a row, and factory bosses cut staff, a private survey showed on Monday.
Companies reported higher costs for raw materials feeding into increased average charges for manufactured goods, the survey found.
Import costs also jumped sharply, as firms paid the price of the tit-for-tat tariffs imposed on some US goods entering China.
The Caixin China purchasing managers’ index dipped to 50.6 in August from 50.8 in July, bringing the reading closer to the 50-point level separating expansion from contraction.
That’s the weakest level since last year June, and worryingly close to the 50-point mark that shows stagnation.
This slowdown suggests that the tariffs imposed on Chinese goods by Washington this year, and the threat of further levies this autumn, are now hurting China’s economy.
That may show that the US-China trade war is sending ripples of uncertainty into other markets.
President Donald Trump’s administration could slap tariffs on another US$200 billion of Chinese imports as early as this week.
Facing rising costs and sluggish demand, China’s manufacturers have been reducing their payrolls for nearly five years straight, according to the Caixin survey, which focuses more on small and mid-sized firms. But the August staff cuts were the sharpest in over a year.
Policymakers are accelerating approvals for road and rail projects and are trying to reduce business costs. More cash is being pumped into the financial system to bring down lending rates, taxes are being cut and state banks are being urged to keep credit flowing to companies hit by trade tensions.
China isn’t the only country to experience a manufacturing slowdown last month. South Korea’s factory sector shank for the sixth month in a row. Its manufacturing PMI came in at 49.9, up from 48.3 in July, but still in contraction territory.
China’s Manufacturing Sector Recorded the Weakest Growth in 14 Months
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