China’s factory slowdown continues as new export orders falter

The China Federation of Logistics and Purchasing’s official purchasing managers index, or PMI, remained at 49.5, the same as in May, on a scale up to 100 where 50 marks the cut off for expansion.

“From the perspective of output, China’s economy is maintaining expansion, but the momentum of recovery still needs to be consolidated,” the official Xinhua News Agency cited Zhao Qinghe, senior statistician for the National Bureau of Statistics, as saying.

The PMI for new export orders slipped to 49.4 from 49.6, perhaps reflecting announcements by the European Union and United States of plans to increase their tariffs on imports of electric vehicles from China.

A private-sector survey released Monday by the financial media group Caixin was more optimistic, edging up to 51.8 from 51.7 in the previous month. That was the fastest expansion of factory output in two years, it said. Analysts had forecast that it would fall.

But while sentiment was positive, the level of confidence among purchasing managers fell to the lowest in over four-and-a-half years due to worries over intense competition and uncertain market conditions, Caixin said.

The surveys offered scant insight into whether various measures to boost the property sector, such as cutting mortgage interest rates and down payments, have had much impact on an industrywide slump that followed a crackdown on excessive borrowing by developers.

“The PMIs for June were mixed but on balance suggest that the recovery lost some momentum last month,” Capital Economics said in a report.

The official PMI reading for high-tech manufacturing rose to 52.3 in June from 50.7 in May, reflecting the government’s drive to boost investment in upgrading factories and equipment in new industries such as computer chip and electric vehicles.

“This shows that the transformation and upgrading of China’s manufacturing industry has continued to advance,” Zhao was quoted as saying.

Chinese leader Xi Jinping has made growth of such advanced industries a top priority, a theme likely to dominate an upcoming meeting of top officials of the ruling Communist Party when they meet later in the month.

Xinhua said in a separate report that during the meeting the party would disclose a new round of “deep and comprehensive reforms.”

Such measures will “chart the course forward for the world’s second largest economy,” it said.