China’s factory activity continued to contract while the services sector slowed last month, as Chinese policymakers prepared an emergency stimulus blitz to revive an economy facing challenges across the board.
The official manufacturing purchasing managers’ index (PMI) was 49.8, meaning the sector has now been in contraction since April last year, except for three months. The non-manufacturing PMI showed construction and services activity lost momentum, after growing in August.
The data released yesterday showed the economy remained in a slump before Chinese officials announced a broad package of measures aimed at reviving growth. The central bank last week cut key interest rates and freed up cash for banks to boost lending, while the elite politburo pledged to support fiscal spending and stabilize the beleaguered property sector.
Photo: AFP
“I don’t think September macro data points are going to matter this time for markets,” abrdn Asia Ltd investment director Xin Yao Ng (黃新耀) said. “It’s all forward looking about what kind of fiscal stimulus comes out.”
The spotlight is now on what measures the Chinese Ministry of Finance might unleash, as officials from other arms of China’s economic universe implement measures to boost the property market and rate cuts.
Reuters reported the Ministry of Finance is planning to issue two trillion yuan (US$285.2 billion) worth of special sovereign bonds this year, with half devoted to boosting consumption.
If Beijing needed more reason to draw a line under its post-COVID-19 pandemic slowdown, the Caixin PMI survey last month also released yesterday showed the country’s manufacturing activity unexpectedly fell into contraction while services expansion weakened to the slowest in a year. That private gauge has typically painted a rosier picture of the economy.
“The PMIs suggest that the economy is still weak, but there will be more focus on the impact of the strong stimulus measures announced over the past week,” United Overseas Bank Ltd (大華銀行) economist Woei Chen Ho (何為真) said. “The monetary and fiscal policy mix should prevent the economy from further weakening in the near-term.”
While the Chinese ministry has yet to make an official announcement, other monetary and economic authorities have begun to flesh out their part of the stimulus package over the last few days. The People’s Bank of China on Sunday said homeowners would be able to renegotiate terms with their lenders, a move that would reduce their mortgage burdens and potentially boost household spending, starting Nov. 1.
The Chinese National Development and Reform Commission, the nation’s economic planning agency, on Friday pledged full support to help private companies overcome difficulties, while Chinese Premier Li Qiang (李強) at a Chinese State Council meeting on Sunday said that government agencies would accelerate the pace of implementing policies as they strive to meet annual goals, state broadcaster China Central Television reported.
Beijing’s ability to reach its target of about 5 percent GDP growth was increasingly in doubt after data showed activity cooled across the board in August.
“The State Council responds to the politburo who demands for increasing government investment,” said Australia & New Zealand Banking Group Ltd chief economist for greater China Raymond Yeung (楊宇霆), who expects the Chinese economy to grow 4.9 percent this year.
“The keyword here is ‘execution,’” Yeung said.
HANDOVER POLICY: Approving the probe means that the new US administration of Donald Trump is likely to have the option to impose trade restrictions on China US President Joe Biden’s administration is set to initiate a trade investigation into Chinese semiconductors in the coming days as part of a push to reduce reliance on a technology that US officials believe poses national security risks. The probe could result in tariffs or other measures to restrict imports on older-model semiconductors and the products containing them, including medical devices, vehicles, smartphones and weaponry, people familiar with the matter said. The investigation examining so-called foundational chips could take months to conclude, meaning that any reaction to the findings would be left to the discretion of US president-elect Donald Trump’s incoming team. Biden
INVESTMENT: Jun Seki, chief strategy officer for Hon Hai’s EV arm, and his team are currently in talks in France with Renault, Nissan’s 36 percent shareholder Hon Hai Precision Industry Co (鴻海精密), the iPhone maker known as Foxconn Technology Group (富士康科技集團) internationally, is in talks with Nissan Motor Co’s biggest shareholder Renault SA about its willingness to sell its shares in the Japanese automaker, the Central News Agency (CNA) said, citing people it did not identify. Nissan and fellow Japanese automaker, Honda Motor Co, are exploring a merger that would create a rival to Toyota Motor Corp in Japan and better position the combined company to face competitive challenges around the world, people familiar with the matter said on Wednesday. However, one potential spanner in the works is
HON HAI LURKS: The ‘Nikkei’ reported that Foxconn’s interest in Nissan accelerated the Honda-merger effort out of fears it might be taken over by the Taiwanese firm Nissan Motor Co has become the latest buyout target in Japan as it explores a merger with Honda Motor Co and faces an overture from Hon Hai Precision Industry Co (鴻海精密), known as Foxconn Technology Group (富士康科技集團) internationally. Shares in Nissan yesterday jumped 24 percent, the most on record, to hit the daily limit, after the two Japanese automakers acknowledged that talks are ongoing to better position themselves for competitive challenges during a time of upheaval in the global auto industry. Foxconn — a Taipei-based manufacturer of iPhones, which has been investing heavily in factories to build electric vehicles — has also
CHIP SUBSIDY: The US funding would help alleviate the financial pressure from building two fabs in the US and should lift gross margins in 2026, the company said GlobalWafers Co (環球晶圓), the world’s third-largest silicon wafer supplier, yesterday said it is to receive US$406 million in subsidies from the US Department of Commerce for two new US fabs under the CHIPS and Science Act, with the first batch of the funds likely coming next year. The grant represents 10 percent of the planned investments of US$4 billion in advanced semiconductor wafer manufacturing facilities in Texas and Missouri, GlobalWafers said. The commerce department is to disburse the funds based on the completion of project milestones over a multiyear timeframe, the company said. Along with the tax credit, which is equal to
RSS