China factories feel tariff pinch

A ball mill machine at a factory in Nantong, Jiangsu province. China's manufacturing sector is continuously feeling the pinch of the tariffs imposed by the US.

China's factory activity shrank more than expected in June, an official manufacturing survey showed, highlighting the need for more economic stimulus as US tariffs and weaker domestic demand ramped up pressure on new orders for goods.
The Purchasing Managers' Index (PMI) stood at 49.4 in June, China's National Bureau of Statistics said on Sunday, unchanged from the previous month and below the 50-point mark that separates growth from contraction on a monthly basis. Analysts polled by Reuters predicted a reading of 49.5.
The weak manufacturing readings are likely to cast a shadow over the apparent progress US and Chinese leaders made at the G20 summit in Japan over the weekend in restarting their troubled talks over tariffs amid a costly trade war.
Many economists still expect the economy to face strong headwinds in coming months as domestic demand falters and external risks rise.
"Although the outcome of the G20 summit [in Osaka] might boost confidence for some entities, organic growth in the economy is still insufficient, and counter-cyclical stimulus policies need to be maintained," researchers at Huatai Securities wrote in a research note on Sunday.
"The PMI index continued to fall across the board this month, and only the raw material inventory sub-index was up due to weak demand," the research note read.
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.
Export orders extended their decline with the sub-index falling to 46.3 from May's 46.5, suggesting a further weakening in global demand. Import orders also worsened, reflecting softening demand at home despite a flurry of growth-supporting measures rolled out earlier this year.
Premier Li Keqiang stoked expectations of more action last week, pledging measures to cut real interest rates on financing for small and micro firms.
"China will maintain our long-standing commitment to reform and opening in order to continue to expand and open. We welcome more and more foreign investment to come to China," Li had said. "We will also relax [restrictions on] access to even more fields to create a market-oriented, law-based internationalised business environment."