China July factory growth cools but construction boom fortifies economy
BEIJING (Reuters) – Growth in the Chinese manufacturing sector slowed down slightly in July as foreign demand for Chinese products slowed, but government-led infrastructure prevented construction from buzzing and helped Second world economy.
The official purchasing manager index (PMI) exceeded the 50-point mark that separates contraction growth for the twelfth consecutive month as China poured funds into a construction boom that fueled demand Everything from cement to steel and other building materials.
But the broad consensus among China’s observers is that economic growth will refresh in the coming months as government repression of financial risks increases borrowing costs for businesses and reduces profits.
The official PMI stood at 51.4 in July, the National Bureau of Statistics said on Monday, down from 51.7 the previous month and slightly less than forecast 51.6 in a Reuters poll.
Export orders, which helped Chinese factories, recovered strongly in June, declined this month as manufacturers reported a slowdown in foreign demand. The overall production of the plant has grown less rapidly than in June.
New export orders fell from 50.9 in July from 52.0 in June, which drove the index for factory orders in general to 52.8 from 53, 1.
“The breakdown suggests that the weakness of foreign demand is partly responsible: the new export orders have decreased by a greater margin than the new general orders,” said Julian Evans-Pritchard, a Chinese economist based in Singapore To Capital Economics.
While China’s foreign trade is facing a rather positive environment during the second half of the year, uncertainties remain, said Foreign Trade Minister Qian Keming in Beijing on Monday.
The US and China failed earlier this month to agree on further important steps to reduce the US trade deficit with China, casting doubt on President Donald Trump’s economic and security relations With Beijing.
At the national level, the construction sector remained strong as the government intensified its investment in infrastructure projects. Separate data showed that China’s steel sector was in poor health, expanding in July at its fastest pace since April 2016.
The PMI’s reading of the construction sector revealed a strong recovery of 62.5 in July from 61.4 in June.
Commodity stocks declined slightly in July, according to the survey, while imports were almost stable and suggested stable domestic demand.
Activity in the large plants rose in July, with the sub-index for major manufacturers reaching 52.9 from 52.7.
A one-year construction boom helped China to post stronger than expected economic growth of 6.9 percent in the first half of 2017.
But the higher bank financing costs observed in the first half of the year will be reflected in the real economy, while the red-hot real estate market will moderate after waves of government cooling measures.
The increase in borrowing costs is expected to affect small businesses more difficulty. Indeed, a reading on the medium and small manufacturers showed an activity contracted this month.