China Cracks: Manufacturing Sector Contracts for First Time Since Trade War Began

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The trade war appears to be hurting China more than expected.

China’s private manufacturing sector contracted in December, according to a survey released Wednesday.

The Caixin manufacturing purchasing managers’ index, which mainly tracks private factories, fell to 49.7 in December from 50.2 in November. Any reading below 50 indicates a contraction. The private PMI has been above 50 since May of 2017.

The purchasing managers’ data comes just two days after China’s official purchasing manufacturing index, which is mainly based on state-owned businesses, fell to 49.4. That was the first contraction for this index since July 2016.

The two PMI figures suggest that the Chinese economy is on an even weaker footing than many economists expected. Domestic demand appears to be falling and U.S. tariffs are weighing on the world’s second-largest economy.

The lower than expected figures dragged down global stocks, pulling share prices down in Hong Kong, Shanghai, and Japan. U.S. futures indicate the major indexes in the U.S. will also likely open lower.

China’s leadership has shown signs of concern over the country’s economic weakness. In recent weeks, leaders have promised tax cuts and monetary easing. As well, China has re-engaged with U.S. trade negotiators, hoping to reach a deal to stave off the Trump administration’s plans to raise tariffs on Chinese made goods.



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