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ECONOMY: Activity Slows Down In February Due To Holidays, But The Outlook Remains Positive
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Activity Slows Down In February Due To Holidays,
But The Outlook Remains Positive
By Morgan Brady

BT 201804 Economy 04 据相关数据显示,2月份我国经济表现依然强劲。 2月份中国制造业采购经理人指数从51.3下降至50.3。虽然这是继去年9月份52.4以来的低谷,但该指数仍然在50%以上,这表明商贸往来活动规模依然在扩大。此类扩张主要见诸大型企业,对于中等规模和小规模的企业来说,这个数字略低于50%,并略有下降。

2月份非制造业的PMI指数为54.4,相对较高。这是因为2月是农历新年、元宵节等节日“扎堆”的时候,部分相关服务业的表现明显优于制造业,餐饮、铁路和航空运输、互联网和电子电信等行业增长较快。

在数据显示乐观的同时,快速增长面临的挑战依然存在,由于美国总统特朗普决定对我国的钢铁和铝征收关税,市场依然受到了影响。特朗普政府希望减少贸易逆差,这一目标有两个含义:美国对中国的贸易出口会增加,而中国对美国的出口却很可能会下降。然而,考虑到中国对其他地区的出口规模也很庞大,其政策影响可能不大。

此外,根据前两个月的数据预测,中国今年未来三个季度的预期依然非常乐观,这不仅对中国有利,而且对依赖中国经济增长的其他邻国和经济体也有积极影响。

China’s Manufacturing PMI in February

Performance of the Chinese economy remains largely positive in February based on many indicators. Activity of the purchasing managers in China has slowed down in February 2018 as the index for purchasing manager’s activity declined by 1 point from 51.3 to 50.3. It has been declining since September last year when the index showed a reading of 52.4. The index, however, remains over 50% which indicates expansion in activity.
 

This expansion was mostly seen in larger enterprises as the index was 52.2 for those organizations. For medium size and small size organizations, the number was slightly below 50% and it indicated slight contraction.
 

The spring festival holiday slowed down productivity as the production index, which is a constituent component of PMI, declined to 50.7, albeit still in the expansion range. Concurrently, the new orders index, which is another component of PMI, declined slightly as well to 51.0%.

BT 201804 Economy 01Non-manufacturing PMI

Other sectors performed better than the manufacturing sector, given the increased expenditure in the holiday season, which drove demand to restaurants, railway and air transport, Internet and telecommunications, among others. The non-manufacturing PMI for February showed a reading of 54.4 in February. The expansion has been steady throughout the previous year.
 

The recent decline in activity during the month of February is expected to be temporary, considering the high confidence in small and medium businesses reported earlier in January. Another point that supports this assumption is the fact that the composite PMI index remained expansionary above 50 at 52.9% in February.

BT 201804 Economy 05Prospects of a Trade War

Yet, challenges remain in the face of high growth, as markets are still affected by the rising prospects of a trade war, prompted by the decision by the Trump administration to impose Tariffs on steel and aluminum imports. The Trump administration aims to reduce the trade deficit and has asked China recently to increase its imports from the US in order to help achieve this objective. The Trump administration aims to reduce the deficit by $100 billion, which is slightly more than a quarter of the deficit of last year at $375 billion.
 

This target has two implications: US exports to China may increase, and the Chinese exports to the US will most likely decrease. China’s exports to the US constituted 18.3% of its total exports in 2017, and this decision can have a moderate impact on China’s income from the US. Yet, the effect is not likely to be large given that the size of China’s exports to other regions including the European Union is also large and may exceed the size of exports to the US.
 

Outlook for the Remainder of the Year Remains Optimistic

A potential trade war can only have a limited effect, and expectations of a positive remainder of 2018 were further confirmed by the results of the survey of financial markets experts by the China Economic Panel in February. Experts projected that growth in 2018 will reach 6.7%, driven mainly by domestic consumption.
 

Domestic consumption is likely to remain strong, given the current downward trajectory of unemployment, reaching 3.9% in January 2018. This will likely lead to an increase in disposable income and thus further reinforce domestic consumption.
 

The sales managers’ index, conducted by London-based World Economics LTD. Readings and which depicts the sentiment of sales managers, slightly declined to 51.9 in February from a reading of 52.2 in January. Despite this mild decline, the index still reflects positive performance and strong momentum at the beginning of the year.

BT 201804 Economy 03Issues of Uneven Economic Development Remain To Be Addressed

Indicators show a bright picture in general, but one challenge remains to be addressed for China, which is that of unbalanced economic development in the country. This is reflected clearly by the different levels of economic activity in different regions. For example, Tianjin’s Binhai is filled with empty commercial buildings whereas many other areas are flourishing. The reason for this is that local governments in China have been increasingly more influential under a decentralized governance structure. This structure has left the central government with less power to coordinate and synchronize economic development through the entire country.
 

Local governments do support the central state in economic development, but sometimes the pursuit of aggressive growth objectives leads to an excessive focus on economic performance and less focus on social impact, leading to marginalization of some groups, and competition between local regions. What’s more, this competition leads some local regions to implement protectionist policies against other regions.

BT 201804 Economy 02Conclusion

Projections remain very positive for the rest of this year for China, based on the numbers from the first two months. This is positive not only for China, but also for other neighboring economic regions that are dependent on economic growth in China for their own growth. A slowdown in China can lead to a slowdown in other areas including those in Asia, Latin America, and even in the global economy as a whole.
 

But this strong momentum and strong short term picture should not distract officials from focusing on important long term issues such as social justice, synergetic growth, and reduced poverty. If not addressed, those issues can increase tensions, undermine growth and reverse the hard work China has done to reach the place it has in the global economy today.

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