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© Reuters. An employee works on the production line of a Tianjin Wanda Tire Group tire factory in Xingtai
BEIJING (Reuters) – Industrial activity in China grew at a steady but moderate pace in May, according to a private survey, but analysts say the slowdown in business exports to the United States to avoid increases in Rates masked the underlying weakness of the economy.
Manufacturers of the world's second largest economy have recently come under heavy pressure due to escalating trade disputes with the United States. An official gauge of the factories' activity last week showed that conditions were deteriorating with slowing domestic and external demand.
Monday's Manufacturing Purchasing Managers' Index (Caixin / Markit) also showed modest growth at 50.2, unchanged from April, and above the expectations of economists, who 50.0.
While it was the third month, the index stayed above the contraction-neutral contraction of 50 mark contraction, but output growth slowed and companies were the least optimistic of production since the beginning of the survey series in April 2012.
Growth in new orders resumed in May, although the rate of expansion remained marginal. Survey respondents attributed stronger sales growth to stronger foreign demand and new product launches, as new export orders rose at its fastest pace since January, after being contracted in April.
But some also spoke of fierce competition and harsher trading conditions.
Contrary to the official official survey of factories in China, the private indicator focuses mainly on more export-oriented small and medium-sized enterprises, exposing them both to the upheavals of the multi-month US-China trade war. and lower demand globally.
The increase in new export orders suggests that some companies are shipping goods to the United States to avoid tariff increases that US President Donald Trump has threatened to touch again for $ 300 billion. dollars of Chinese goods, Nomura analysts wrote in a note.
However, the initial load will probably be "a short-term distortion and more serious ROI effects could follow," they said.
The Caixin study showed that factory output had increased at the slowest pace since January, and that some firms had increased production due to increased new orders, while others noted that demand was relatively moderate.
A significant part of China's economic support program aimed to keep struggling small businesses afloat, with Beijing being particularly sensitive to large-scale layoffs that could fuel social anxiety.
The survey showed that companies continued to cut jobs in May for the second month in a row in an effort to reduce operating costs, following the first increase in recruitments in March, nearly five years. and half.
Most economists believe that Beijing will have to deploy more stimulus to support growth, as expectations are focused on further reductions in the amount of liquidity held by banks in the form of reserves and budget spending.
The sudden escalation of the trade dispute between China and the United States last month further heightened fears of a more pronounced slowdown in the world's second-largest economy. Washington has imposed additional tariffs of up to 25% on $ 200 billion of Chinese goods, pushing Beijing to take revenge, the financial markets had a torrid period last month.
Over a one – year time horizon, companies were the least optimistic about production since the start of the series of surveys in April 2012 in May.
"The Sino-US trade dispute, restrictive state policies, the weak automotive market and generally controlled global demand have all been cited as critical factors that could affect production in the coming year" says the statement.
Jingyang Chen, an economist at HSBC Global Research, told customers that the trade war remains a major risk for manufacturers.
"Beijing will probably double on the easing of the private sector".
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