On Tuesday, December 31, according to official data released by the Chinese government, despite recent stimulus measures, China’s manufacturing activity in December has started to slow down in the face of increasingly growing trade risks.
The data shows that China’s manufacturing Purchasing Managers’ Index (PMI) for December dropped from 50.3 the previous month to 50.1. This reading is lower than analysts’ expectations of 50.3, indicating that manufacturing activity in China in December saw almost no growth.
Gabriel Ng, economist at Capital Economics, pointed out that the slowdown in Chinese factory activity is due to a “decline in output.”
Ng stated that overall, new orders reached an 8-month high, and the export order index also rose to its highest level in 4 months, reflecting concerns from U.S. businesses about potential tariffs on Chinese goods imposed by Trump post-inauguration, leading to an early wave of shipments.
According to the data, the sub-index for new orders rose from 50.8 in November to 51.0 this month, hitting an 8-month high. However, sub-indices such as new export orders (48.3), employment (48.1), and factory prices (46.7) remain in contraction territory.
It is worth noting that many experts have warned that China’s published economic data has often been accused of being excessively embellished or falsified, and may not accurately reflect the current state of the Chinese economy. China is facing challenges such as slowing economic growth, reduced consumer spending, and a long-standing real estate crisis.
Trump has pledged to impose a 10% tariff on Chinese goods. During his campaign, he also mentioned considering tariffs exceeding 60% on Chinese goods and revoking China’s Most Favored Nation status. For China, the world’s largest exporter of goods, this poses significant growth risks.
Analysts at Nomura Securities have warned that it is premature to determine whether measures such as the consumer goods trade-in plan and easing real estate purchase restrictions can provide long-term support to the Chinese economy.
In a report, they stated, “The surge in purchases of durable goods could lead to a significant pullback. The real estate sector has not fully recovered due to the burden of debt badgering struggling developers.”
They also added that Trump’s return to the White House also poses a risk to Chinese exporters.
Recent economic data also indicates that China is still under pressure from monetary tightening, primarily due to weak consumer demand and the prolonged downturn in the real estate market.
Consumer inflation in China for November has dropped to its lowest level in 5 months, and both export and import figures fell below expectations. Additionally, the latest retail sales data fell short of analysts’ predictions.
Chinese industrial profits have also declined for the fourth consecutive month. Year-on-year, there was a 17.8% drop in August, 27.1% drop in September, 10% drop in October, and a 7.3% drop in November.