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China's plant growth weakest in more than 2 years, dropped in the export order

BEIJING (Reuters) – China's manufacturing sector barely expanded in October and missed expectations, as both domestic and external demand ebbed,…

BEIJING (Reuters) – China’s manufacturing sector barely expanded in October and missed expectations, as both domestic and external demand ebbed, in a sign of deepening economic crisis from an intensifying trade war with the United States.

PHILOTOOTH: A worker cut steel rods at a railway bridge building in Lianyungang, Jiangsu Province, China, September 1

2, 2015. REUTERS / China Daily

The official purchasing chiefs index (PMI), released Wednesday, fell to 50.2 in October , the lowest since July 2016 and down from 50.8 in September. It was a touch above the 50-point that separates the growth from a 27-month straightforward summary.

Analysts investigated by Reuters had forecast the official meter, which gives global investors their first look at the business conditions in China at the beginning of the last quarter, to sink slightly to 50.6 a month.

The latest treatment suggests further slowing down the world’s second largest economy and could lead to more political support from Beijing on top of a series of new initiatives.

A production index fell to 52 in October from 53.0 in September, while a new stock index dropped to 50.8 from 52.0.

New export orders, an indicator of future operations, contract for a fifth straight month and at the fastest rate for at least one year. Sub-index fell to 46.9 from 48.0 in September.

China’s exports unexpectedly grew to higher gear in September, largely as corporate frontloaded transports to avoid stiffer US customs, but analysts see press construction in the coming months. The continued decline in export orders may lead to this scenario.

October is the first full month after the latest US tax rates came into force. Washington and Beijing hit additional fees on each other’s goods on September 24, and US President Donald Trump has threatened to beat China with more information.

China’s economy grew at its weakest pace since the global financial crisis in the third quarter, as manufacturing output and infrastructure investment declined. Analysts believe that business conditions get worse before they get better.

Companies are already faced with the pressure on the result. A survey over the weekend showed that the profit growth in the country’s industrial power plants was cooled for the fifth consecutive month in September due to a greater slowdown in production and sales.

China’s manufacturing sector has been hampered by a reduction of credit sources in connection with Beijing’s multi-annual breakdown of corporate debt and risky lending practices, with smaller companies, particularly under pressure.

Premier Li Keqiang said last month that the country’s economy is facing increased downward pressure and promised to take targeted measures to prevent major fluctuations in growth.

Policy makers have already changed their priorities to reduce the risks of growth. Earlier this month, China’s Central Bank announced the fourth reserve requirement (RRR) for this year, and is expected to further facilitate monetary policy.

It also goes ahead to lower funding costs and impose more support for private companies, an important source of jobs.

On fiscal policy, government is boosting infrastructure projects and has promised more tax cuts next year to support growth.

Another sister survey published by NBS on Wednesday showed that growth in China’s service sector was moderated in September, while the official non-manufacturing purchasing manager’s index (PMI) dropped to 53.9 from 54.2 the previous month.

Reporting of Lusha Zhang, Stella Qiu and Ryan Woo

Our Standards: Thomson Reuters Trust Principles.

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