China manufacturing loses momentum in June

Growth in China manufacturing slowed to zero in June as weak demand and overcapacity weighed on the economy.

China’s manufacturing sector has been struggling for months. Pic: AFP

Activity growth in Chinese factories slowed to zero in June, an official index showed Friday, as weak demand and industrial overcapacity weighed on the world’s second-largest economy.

The official Purchasing Manager’s Index (PMI), which tracks activity in the country’s factories and workshops, came in at 50.0, according to the National Bureau of Statistics (NBS).

The mark is the break-even point in the index, with reading above it signalling expansion, while anything below indicates shrinkage.

The figure was slightly down from the previous two months, but matched economists’ median expectations of 50.0 in a survey by Bloomberg News.

“It is noteworthy that the current domestic market demand remained weak and real economy momentum was still insufficient,” Zhao Qinge, analyst for the National Bureau of Statistics, said in a note.

Investors watch the figure closely as the first available indicator each month of the health of the world’s second-biggest economy.

The data suggested China was “unlikely” to achieve growth of 6.7 per cent in the second quarter and the government would support growth with spending, analysts with ANZ said in a note.

“Brexit presents a new risk to China’s external demand and challenges China’s manufacturing sector in H2 2016. To react, we believe that the government will stimulate the economy by hastening infrastructure investment and urbanisation.”

China’s economy is a vital driver of global expansion. But it grew only 6.9 per cent last year, its weakest rate in a quarter of a century.

The key manufacturing sector has been struggling for months in the face of sagging global demand for Chinese products and excess industrial capacity left over from the country’s infrastructure boom.

Some traditional industries dropped significantly, the NBS said, as the index for activity in highly energy-intensive factories fell 0.9 points to 48.2.

AFP