The growth of factories in China is the weakest in more than 2 years, the contraction of orders to export is strengthening

BEIJING (Reuters) – The Chinese manufacturing sector barely developed in October and missed expectations, as domestic and external demand weakened, a sign of deepening economic cracks following the intensification of the economy. commercial war with the United States.

The official PMI index, released Wednesday, fell to 50.2 in October, its lowest level since July 2016 and down from 50.8 in September. It was a little above the 50-point mark that separates growth from contraction for a 27th consecutive month.

Analysts polled by Reuters had predicted that the official gauge, which gives international investors a first glimpse of the business situation in China early in the last quarter of the year, would drop slightly to 50.6 for the month.

The latest reading suggests a further slowdown in the world's second-largest economy and could spur further political support from Beijing, in addition to the many recent initiatives.

A production sub-index fell from 52.0 in September to 52 in October, while a new orders sub-index rose from 52.0 to 50.8.

New export orders, indicators of future activity, contracted for a fifth straight month and at the fastest pace in at least a year. The sub-index rose from 48.0 in September to 46.9.

Surprisingly, China's exports surged in September, largely due to companies sending larger charges to avoid US duties, but analysts say the pressure will rise in the coming months. come. The steady decline in export orders could be at the origin of this scenario.

October is the first full month after the entry into force of the latest US tariffs. Washington and Beijing imposed additional tariffs on their respective products on September 24, and US President Donald Trump threatened to hit China with more rights.

The Chinese economy has experienced the slowest growth since the global financial crisis in the third quarter, as manufacturing output and infrastructure investment slowed. Analysts believe that working conditions will deteriorate before improving.

Companies are already under pressure on their profits. A study over the weekend showed that profit growth in the country's industrial power plants slowed for the fifth consecutive month in September, due to a further slowdown in production and sales.

The Chinese manufacturing sector has been constrained by the reduction of credit sources following the multi-year repression of corporate debt and risky credit practices in Beijing, with small businesses being particularly challenged.

Prime Minister Li Keqiang said last month that the country's economy is under increasing downward pressure and has pledged to take targeted measures to avoid significant fluctuations in growth.

Policy makers have already changed their priorities for reducing risks to growth. Earlier this month, the Chinese central bank announced the reduction of the fourth reserve requirement ratio (RRR) for this year and should further ease monetary policy.

It is also stepping up efforts to reduce funding costs and is committed to providing more support to private companies, an essential source of jobs.

On the fiscal side, the government is also stepping up stimulus measures through infrastructure projects. He also promised further tax cuts next year to support growth.

Another poll released Wednesday by the NBS showed that growth in China's services sector was moderate in September, with the official non-manufacturing purchasing managers (PMI) index declining to 54.9 the previous month.