Is the Policy Support Helping Chinese Manufacturing?
China has been showing increasing weakness in many sectors of the economy, especially the real estate sector, but manufacturing which has traditionally been the strongest sector in China is also suffering. It fell into contraction earlier this summer as PMI and ISM indicators showed, which is weighing on risk assets such as commodity dollars.
The government wants to reduce the economy’s reliance on the real estate sector. The industry, which contributes around one-fourth of China’s overall economic development, has experienced a sharp decrease in the previous three years. According to figures released on Thursday, China’s manufacturing activity contracted in August at a slower rate than analysts had predicted, suggesting that recent government stimulus measures may be having an impact on the economy.
The National Bureau of Statistics reported that the manufacturing purchasing managers’ index (PMI) was 49.7 points in August. The reading exceeded both the 49.5 point prediction and the 49.3 point figure from the previous month. This year, as the economy in China’s top trade partners deteriorated, declining domestic and international demand was the main cause of weakness in the manufacturing sector. This was made worse by a deteriorating trade dispute with the United States, which tries to deny China access to cutting-edge chip manufacturing technologies.
Although, manufacturing PMI showed a slight improvement, which is encouraging. Commodity dollars in particular are really sensitive to economic figures from China, since China is a major importer and earlier today we had the Caixin manufacturing report
Caixin/S&P Global August 2023 Manufacturing PMI
- August Caixin manufacturing 51.0 points vs. 49.3 points expected
- July Caixin manufacturing was 49.2 points
A good beat and encouraging news from China.
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