Economy

China's factory activity declines in June

China's factory activity declines in June”

Beijing has been counting on a strong services sector to pick up the slack as it tries to shift the economy away from a dependence on heavy industry and manufacturing exports.

The weak manufacturing readings are likely to cast a shadow over the progress United States and Chinese leaders made in Japan over the weekend in restarting talks over tariffs amid a trade war.

TD Securities analysts note that the details of China's manufacturing PMI were soft as the overall PMI came in at 49.4 in June (market 49.5), the same as the month earlier. That said, the pace of contraction was only slight.

The lacklustre reading was due to new orders falling into contractionary territory, pointing to shrinking domestic demand, said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin.

"It's crucial for policymakers to step up countercyclical policies", he said.

The National Development and Reform Commission on Sunday published an updated "negative list" of sectors restricted for foreign investment, which now consists of 40 activities with restricted or no access to foreign investment, down from the 48 items mentioned in the last list, which came into effect in July 2018, reports Efe news.

In June, China's factory output growth slowed, with the subindex falling to 51.3 from 51.7 in May while the contraction in total new orders accelerated to 49.6 from 49.8.

Global fallout from the U.S. The latter are more sensitive to the consequences of the trade war. However, Chinese state media warned on Sunday Beijing and Washington will likely face a long road before the two countries could reach a deal.

That's despite a sustained economic support programme that began early past year, ranging from higher infrastructure spending to tax cuts to a spate of measures aimed at keeping struggling smaller firms afloat.

Business sentiment was broadly neutral in June as firms were more concerned about the US-China trade dispute.

Market expectations are centring on further cuts in the amount of cash banks must hold as reserves and even higher fiscal spending, though some China watchers also expect the central bank to cut one or more of its key policy interest rates to reduce corporate borrowing costs.

The restriction that domestic shipping agencies must be controlled by the Chinese side will be scrapped.

Amid reports of trade tensions, total new business and worldwide sales declined at the end of the second quarter. Articles appear on euronews.com for a limited time.



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