With the vast majority of minor products manufactured in China, the country’s factories are usually producing at full steam 24 hours a day. However, the ongoing trade war between China and the U.S. and its resulting tariffs have slashed export orders, and China’s factories have begun to suffer for it.
According to the National Bureau of Statistics, the Purchasing Manager’s Index (a statistical snapshot of China’s economy taken at the start of each month) showed the country’s economy experience its first contraction in over two years. The index marked the economy at 49.4 for December. When the index drops below 50, that’s the official sign of economic contraction. This is the first loss China’s economy has experienced since July of 2016, and the lowest rating received since February of that same year. According to a sub-index of the PMI, factory output fell to 43.3 from 46.4, and overall production fell to 50.8, the lowest recorded amount since February 2018 at 51.9.
China is expected to begin deploying economic support measures in the next few months in order to keep the PMI from sliding any further. If the factory sector continues its downturn, larger, more frequent attempts to boost the economy will need to be made in order to compensate. It seems like Beijing officials are genuinely concerned that the economic situation is going to get worse before it gets better.