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China Stands the Ground

China's economy appears surprisingly strong and capable to withstand American pressure.

China's economy seems strong and capable to withstand the effects of the US administration’s intensifying trade war against Beijing.

In August Caixin China General Manufacturing PMI reached 50.4 as compared with 49.9 in July. That is the highest level since March and the first time in three months that it has risen above the 50 mark.

The figure is substantially higher than 49.8 forecast by economists polled by Reuters.

Caixin China General Manufacturing PMI is one of the most important indicators of the strength of the Chinese economy.

That China’s manufacturing sector rebounded to a five-month high is the result of stimulus measures that China’s government hopes will offset the impact of a series of tariffs imposed by Washington, including new levies of 15 per cent on Chinese goods.

The latest round of US tariffs is aimed at so-called final goods, such as shoes and clothing. China responded by imposing additional tariffs on US goods including crude oil.

Yet, the Chinese government will, most likely, be forced to step up monetary easing to allow more credit to flow into the economy, helping those companies that are struggling to get funding from banks.

The PMI showed that the outlook for Chinese manufacturers toward the coming 12 months was close to its lowest since the Caixin series began. Also, manufacturers’ export orders fell to their weakest point this year amid fears over the impact of trade friction and a cooling global economy.

It may also mean that the trade dispute that erupted more than a year ago is not going to end soon.

Published: September 3, 2019