China's factory activity shrank faster than expected in May on weakening demand, heaping pressure on policymakers to shore up a patchy economic recovery and knocking Asian financial markets lower, Reuters reported. The official manufacturing purchasing managers' index (PMI) fell to a five-month low of 48.8, the National Bureau of Statistics (NBS) said on Wednesday, down from 49.2 in April and below the 50-point mark that separates expansion from contraction. The PMI also dashed forecasts for an increase to 49.4.
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China
China’s era of rapid growth is over. Its recovery from zero-Covid is stalling. And now the country is facing deep, structural problems in its economy, the Wall Street Journal reported. The outlook was better just a few months ago, after Beijing lifted its draconian Covid-19 controls, setting off a flurry of spending as people ate out and splurged on travel. But as the sugar high of the reopening wears off, underlying problems in China’s economy that have been building for years are reasserting themselves.
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The rows of towering buildings crowding the banks of the Gan River are a testament to the real estate boom that transformed Nanchang in eastern China from a gritty manufacturing hub to a modern urban center, the New York Times reported. Now those skyscrapers are evidence of something very different: China’s real estate market in crisis, reeling after years of overbuilding.
One of China’s poorest provinces is testing Beijing’s mettle with a mountain of debt that local borrowers are struggling to repay, the Wall Street Journal reported. Investors worry it is a harbinger of another major debt crisis in the country, and believe the central government will have no choice but to defuse it. Cracks have been showing in the finances of Guizhou, a southwestern province with jaw-dropping landscapes and some of the world’s highest bridges.
U.S.-based Micron Technology Inc. on Monday forecast a hit to revenue in the low-single to high-single digit percentage after a ban by China on sale of its memory chips to key domestic industries marked the latest in the Sino-American trade spat, Reuters reported. China's cyberspace regulator said late on Sunday that Micron, the biggest U.S. memory chipmaker, had failed its network security review and that it would block operators of key infrastructure from buying from the company. It did not provide details on what risks it had found or what products from the company would be affected.
Some Hong Kong-based staff with U.S. consultancy Mintz Group have left the city after the firm's Beijing office was raided by Chinese police in March, according to two sources with direct knowledge of the matter, Reuters reported. Investigations by Chinese authorities into Mintz, as well as U.S. management consultancy Bain & Co and mainland consultancy Capvision Partners, have sent a chill through companies that deal with China, with many unclear where red lines stand as Beijing prepares to introduce stricter anti-espionage laws in July.
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China’s post-Covid growth spurt is sputtering and its youth unemployment rate hit a record high, signaling trouble for a recovery that was expected to boost global growth, the Wall Street Journal reported. A bundle of economic indicators for April, including retail sales, factory production and fixed-asset investment, fell short of economists’ expectations, according to data released Tuesday by China’s National Bureau of Statistics. Investment in the country’s property sector also dropped in the first four months of the year.
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Global investors seeking to trade China’s reopening will have a new strategic tool from Monday: onshore interest-rate swaps that had an annual turnover of $3 trillion last year, Bloomberg News reported. The so-called Swap Connect program between mainland China and Hong Kong provides overseas funds with easier access to the derivatives that will help hedge their exposure to the world’s second-biggest bond market. The channel also enables them to bet on key money-market rates that are sensitive to China’s monetary policy.
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China’s two leading cross-border online brokerages said they will remove their trading platforms from app stores in mainland China this week as Beijing takes a harder stance on capital flows out of the country, Bloomberg News reported. Futu Holdings Ltd. and Up Fintech Holding Ltd., also known as Tiger Brokers, said Tuesday that the move was to comply with the Chinese securities regulator’s requirements on cross-border brokerage businesses. Futu’s app Futubull will be removed Friday, and Tiger Brokers’ app will be taken off on Thursday.
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China's April industrial output and retail sales growth undershot forecasts, suggesting the economy lost momentum at the beginning of the second quarter and intensifying pressure on policymakers to shore up a wobbly post-COVID recovery, Reuters reported. Tuesday's batch of data, which also showed a further decline in property investment, adds to concerns about the outlook for the world's second-biggest economy as both its domestic and export engines of growth remain underpowered.
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