China’s industry shrank by the end of the year for the first time in more than two years. The official PMI for the sector fell to 49.4 points in December from 50.0 points in November, according to data released on Friday.
Experts interviewed by Reuters had expected a drop to 49.9 points. The trade conflict with the US and a global economic slowdown put pressure on companies in the world’s second largest economy. Experts fear that further turbulence will be imminent next year.
US President Donald Trump and his Chinese counterpart Xi Jinping had taken a break in the trade dispute at their meeting in early December and initially waive new duties. Trump expects after a phone call with Xi now with a quick solution in the dispute. „Good progress“ had been made.
Long-term export prospects remain
However, many analysts doubt that the dispute can be settled quickly. The conflict is already costing billions of dollars for both sides. Many companies also stopped investing in the long term. „There are many short-term foreign orders, but few long-term ones,“ said Nie Wen, an economist at Hwabao Trust in Shanghai. „The medium to long-term prospects for exports are not particularly optimistic.“
On the other hand, service providers were better off, with the official PMI rising to 53.8 points from 53.4 in November and still above the 50-count growth threshold. The service sector now accounts for more than half of China’s economic output.
Because of the trade dispute, the International Monetary Fund (IMF) lowered its forecast for Chinese growth in 2019 from 6.4 to only 6.2 percent.
