Factory growth in China in November slows as orders decline

BEIJING (Reuters) – Growth in China's large manufacturing sector stagnated for the first time in November as new orders weakened, putting pressure on Beijing ahead of ambitious trade talks between presidents Xi Jinping and Donald Trump this week -end.

The official index of purchasing managers (PMI), released Friday, fell to 50 in November, exceeding market expectations and down from 50.2 in October.

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The mark of 50 points is considered a neutral territory, indicating zero monthly growth of activity or contraction.

Analysts polled by Reuters had predicted that the official gauge would remain stable compared to the low October, suggesting marginal growth.

The disappointing reading of the factories' activity in China took place one day before Trump and Xi's tightly watched dinner on the sidelines of the G20 summit in Buenos Aires, their first meeting since the two countries began imposing tariffs earlier this year.

However, few market observers expect a major breakthrough in the trade dispute, with neither side showing any intention of making major concessions.

The Trump administration has drawn attention to growing signs of economic weakness in China and weakening its stock markets as evidence that the United States is winning the trade war.

White House economic adviser Larry Kudlow said on Tuesday that Trump was ready to raise tariffs and could add rights to an additional $ 267 billion (208.97 billion pounds sterling). Chinese imports if the meeting did not materialize.

The PMI survey in China revealed a new weakness in new orders from home and abroad.

The production sub-index fell from 52 in October to 51.9 in November, while a new orders sub-index – an indicator of future activity – rose from 50.8 to 50.4.

New export orders declined for a sixth consecutive month. The sub-index rose slightly from 46.9 in October to 47.

Import orders from Chinese manufacturers also fell from 47.6 in October to 47.1%, under the effect of the weakening of domestic demand.

Chinese exports have surprisingly held up well this year, shippers hurrying to buy goods to overtake US tariffs, but orders have been falling for months, increasing the risk of a strong lower if the US raises rates as scheduled on January 1.

Another poll released Friday by the NBS showed that China's service sector growth was moderate in November but remained stable. The official non-manufacturing PMI index rose from 53.9 to 53.4 the previous month.

(Report by Lusha Zhang, Yawen Chen and Ryan Woo, edited by Kim Coghill)