Chinese factory activity shrinks for fourth month as trade woes deepen

Growing trade frictions with the US and slowing global demand are wreaking havoc on China’s factories, with export orders falling for the 15th straight month. (AP)
Updated 31 August 2019

Chinese factory activity shrinks for fourth month as trade woes deepen

  • Beijing tipped to cut major lending rates amid rising job losses, falling export orders and weakening domestic demand

BEIJING: Factory activity in China shrank in August for the fourth month in a row as the US ramped up trade pressure and domestic demand remained sluggish, pointing to a further slowdown in the world’s second-largest economy.

Persistent weakness in China’s vast manufacturing sector could fuel expectations that Beijing needs to roll out stimulus more quickly, and more aggressively, to weather the biggest downturn in decades.

The Purchasing Managers’ Index (PMI) fell to 49.5 in August, China’s National Bureau of Statistics said on Saturday, versus 49.7 in July, below the 50-point mark that separates growth from contraction on a monthly basis.

A Reuters poll showed analysts expected the August PMI to stay unchanged from the previous month.

The official factory gauge showed growing trade frictions with the US and cooling global demand continued to wreak havoc on China’s exporters.

Export orders fell for the 15th straight month in August, although at a slower pace, with the sub-index picking up to 47.2 from the 46.9 reading recorded in July.

Total new orders — from home and abroad — also continued to fall, indicating domestic demand remains soft, despite a flurry of growth-boosting measures over the past year.

“Frontloading of exports to the US ahead of higher tariffs supported trade and overall activity growth, but this effect will likely fade in the next few months,” said analysts at Goldman Sachs in a note.

Manufacturers in consumption-oriented industries such as the auto sector have been especially vulnerable. Carmakers including Geely and Great Wall have slashed expectations for sales and profits.

The data showed that activity at medium and small-sized firms contracted, even as large manufacturers, many backed by the government, managed to expand in August.

Factories continued to shed jobs in August amid the uncertain business outlook. The employment sub-index dropped to 46.9, compared with 47.1 in July.

August brought a dramatic escalation in the bitter year-long Sino-US trade row, with President Donald Trump announcing early in the month that he would impose new tariffs on Chinese goods from Sept. 1, and China letting its yuan currency sharply weaken days later.

After Beijing hit back with retaliatory tariffs, Trump said that existing levies would also be raised in coming months. The combined moves now effectively cover all of China’s exports to the US.

Trump said late on Friday that trade teams from both sides continue to talk and will meet in September, but tariff increases on Chinese goods set to go into effect on Sunday will not be delayed.

The US president had said earlier in the week that China wants to reach a deal “very badly,” citing what he described as increasing economic pressure on Beijing and job losses.

But most observers are highly doubtful of an end to the dispute any time soon, and some analysts have recently cut economic growth forecasts for China in coming quarters.

The sudden deterioration in trade ties has prompted speculation over whether China needs to roll out more forceful measures to keep growth from sliding below 6 percent this year, the bottom end of its target range of around 6-6.5 percent.

Analysts widely expect Beijing will cut some of its major lending rates in September for the first time in four years to help stabilise growth.

But sources had told Reuters before the latest trade escalations that big benchmark rate cuts were considered a last resort since policymakers worry that such a move could fuel a further build-up in debt and squeeze banks’ profit margins, heightening risks to the financial sector.

So far, Beijing has relied on a combination of fiscal stimulus and monetary easing to deal with the economic slowdown, including hundreds of billions of dollars in infrastructure spending and tax cuts for companies.

But analysts note infrastructure investment growth has remained subdued despite the earlier pump-priming measures, underlining the need for additional support.

Growth in China’s services sector activity picked up for the first time in five months in August, with the official numbers from a separate business survey rising to 53.8 from 53.7 in August.

Beijing has been relying on a strong services sector to cushion some of the economic impact from trade uncertainties and sluggish manufacturing activities.

However, despite the higher overall figure, activity in the property industry contracted, the statistics bureau said.

The services sector has been propped up by Chinese consumers’ rising wages and robust spending power in recent years. However, the sector softened late last year amid a broader slowdown.


Case against Ghosn excuse to get him out of Nissan, claim lawyers

Updated 13 November 2019

Case against Ghosn excuse to get him out of Nissan, claim lawyers

  • The former motor giant chief’s legal team has alleged that both his arrest and the prosecution efforts have been illegal

TOKYO: The drama surrounding the arrest of Carlos Ghosn, former boss of motor giants Nissan and Renault, has yet to reach its climax. Yet the plot continues to thicken with each new development.

On Monday, Ghosn’s defense lawyers unveiled court submissions highlighting the circumstances in which the 65-year-old executive was arrested and subsequently held in detention.

“We believe that Mr. Carlos Ghosn is innocent. We believe that the arrest and the prosecution efforts thus far are illegal and therefore Mr. Ghosn should be immediately released,” the head of his defense team, Junichiro Hironaka, said during a press conference at the Foreign Correspondents Club of Japan in Tokyo on Monday.

Hironaka claimed that Nissan wanted to kick out Carlos Ghosn from the company and therefore put together a team dedicated to searching around for something that would justify them to do that.

“This prosecution motion wasn’t initiated because the prosecution side believed that Mr. Ghosn had committed an illegal act. Fundamentally there is a problem with this being treated as a criminal act,” he said.

Hironaka further said that the prosecutor’s office is supposed to be acting in the public good for everyone and not behalf of a specific corporation.

“From the investigation level, there were various problems and mistakes with this case. Furthermore, the Japanese persecution office can’t reach overseas so they rely on Nissan employees to go into Mr. Ghosn’s offices and residences and removed objects illegally,” he said.

Hironaka said there is no evidence to support the alleged wrongdoing claim that Nissan made payments to SBA in Oman, and Ghosn re-directed that money to himself or his family.

“The amounts that were paid by Nissan matched exactly the amounts due to SBA,” he said.

The lawyer had a similar response to the reports connecting some donations by Ghosn to a school in Lebanon that would somehow benefit himself. “There is absolutely no evidence or factual basis for indicating that,” Hironaka said.

He said that his team is trying to access correct information and find out what evidence the prosecution might have.

“I have made an effort to share information with the media, including the foreign media, during this whole pre-trial motion,” he said.

Under the Japanese system, the prosecutors are not required to disclose all the evidence at their disposal. Japanese law requires that prosecutors must disclose anything related to any evidence related to the specific filings they make.

They must also disclose any evidence that is related to the filings that are made by the defense counsel. However, there is no requirement for them to disclose evidence from other parts.

Ghosn was arrested at Tokyo’s Haneda Airport on Nov. 19, 2018, on multiple charges related to his stewardship of the two companies.

The cases involved not only Nissan-Renault and Japan’s Mitsubishi Motors (part of the Franco-Japanese alliance), but also the Japanese and French governments along with various key players from Asia and the Middle East.

Nissan was on the brink of bankruptcy in March 1999, with about 2 trillion yen ($17.6 billion) in interest-bearing debt.

This is when it entered a capital partnership with major French automaker Renault SA. Ghosn has been credited for turning the company around dramatically since then.

However, fears that the high-profile CEO and chairman was planning to merge Nissan into a much larger multinational motor alliance appeared to have fueled speculation regarding the future of the company.

It was reportedly argued within Prime Minister Shinzo Abe’s government that the automaker would no longer be recognizably Japanese.

The case has larger ramifications and the two governments have routinely become involved in discussions related to its future.

According to news reports, when Macron and Abe met in Buenos Aires, the French president asked that the Franco-Japanese alliance be maintained.

On being asked by Arab News Japan about reports of a prosecution team visiting Saudi Arabia and Oman, Hironaka confirmed that the visit indeed took place after Ghosn’s arrest.

“However, we have not been given any access to any information that they may or may not have gathered there,” he said.