Background on the Situation
China’s industrial activity experienced a decline in April, following two consecutive months of expansion. This downturn coincides with the escalating trade war between China and the United States, raising concerns among economists about potential threats to businesses, increased consumer prices, and a possible global recession.
Key Indicators and Data
Purchasing Managers’ Index (PMI): The PMI, a crucial indicator of industrial production, fell to 49 in April according to data released by China’s National Bureau of Statistics (NBS).
The PMI figure fell below the critical threshold of 50, which distinguishes expansion from contraction. Moreover, April’s PMI was lower than March’s 50.5 (the highest in twelve months) and also below the 49.7 projected by Bloomberg.
In April, the US imposed tariffs of up to 145% on numerous Chinese products. China responded by implementing a 125% tariff on US imports.
According to NBS statistician Zhao Qinghe, the PMI drop in April was influenced by factors such as a high baseline due to rapid industrial expansion in February and March, along with a significant shift in the external environment.
Expert Opinions and Implications
Economists have warned that the disruption in trade between China and the US could endanger businesses, elevate consumer prices, and potentially trigger a global recession.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, stated that the weak April PMI was a direct result of the trade war. He further predicted that macro data in both China and the US will weaken as uncertainty surrounding trade policy delays business decisions.
Key Questions and Answers
- Q: What is the Purchasing Managers’ Index (PMI)?
A: The PMI is a key economic indicator that measures the health of the manufacturing and services sectors. A reading above 50 indicates expansion, while a figure below 50 suggests contraction.
- Q: Why is the decline in China’s industrial activity significant?
A: The downturn reflects the impact of the trade war between China and the US, raising concerns about potential threats to businesses, increased consumer prices, and a possible global recession.
- Q: How have the US and China responded to the trade dispute?
A: The US has imposed tariffs of up to 145% on numerous Chinese products, while China has countered with a 125% tariff on US imports.
- Q: What do economists predict for the future of macro data in China and the US?
A: Economists, like Zhiwei Zhang, anticipate that macro data in both countries will weaken due to trade policy uncertainty delaying business decisions.
