China’s Factory Activity Stumbles Again: Third Straight Month Below Growth Threshold in June
Another red flag for the world's factory floor.
China's manufacturing sector just clocked its third consecutive month of contraction—June's numbers dipping below the growth threshold again. Not exactly the 'soft landing' Beijing's economic planners were hoping for.
Meanwhile, crypto markets yawn and keep stacking sats. Because when fiat economies sputter, decentralized finance just shifts gears.
Funny how factory output struggles while Bitcoin hash rates hit all-time highs. Priorities, people.
China’s economy extends slump
Consumer price growth has eased for four straight months through May. “The bigger reflection is domestic demand,” Dan Wang from the Eurasia Group said. Dan further added, “Deflation in China is deepening, the price war across sectors is intensifying.”
Chinese exports to the United States in May tumbled by the greatest margin since the beginning of COVID-19, although overall exports had risen. The PMI’s export orders index stayed at 47.7 in the month of June, in contraction but well above April’s low, when it fell to its weakest point since the end of 2022.
“Export orders are likely reflecting a rebound in US demand after the US-China trade truce,” said Zichun Huang, China economist at Capital Economics. A pause of 90 days on US tariffs covering a dozen other trading partners will be expiring next Wednesday.
China’s retail sales also moved to the upside in May, NBS figures showed. However, worries over household spending persist, giving rise to talk of further stimulus. Officials cut interest rates over and over again, and took steps to shore up confidence in the housing market, where home prices continue to fall and recovery signs weakened.
“Policymakers [are likely to wait] and monitor the development of [the] trade war,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, pointing to some export improvements. “Deflationary pressure is persistent and the labor market is under stress.”
Beyond factories, the non-manufacturing PMI in June—which covers services and construction—rose to 50.5 from 50.3 in May. The construction PMI climbed to 52.8 and composite PMI for both services and manufacturing was at 50.7.
Rare earth export controls are impacting additional products
Export limits and controls in China are now rippling beyond magnets and rare-earths, officially named by officials, threatening wider supply-chain snags and casting doubt on US assertions that the recent trade truce had cleared shipment backlogs.
In April, Chinese authorities began asking for export licenses of 7 rare-earth metals along with magnet materials related to those metals in a tit-for-tat MOVE responding to US tariffs. On June 10, the United States mentioned that it secured an agreement with China to speed up the shipments of rare earths, resulting in the revival of a 3-month trade deal reached in Geneva.
Yet Chinese commerce, along with customs officials, are demanding extra inspections along with third-party testing of chemicals on products not listed originally in the controls list, according to managers at companies in China and the West.
Another Chinese firm’s representatives mentioned that the company got “heavily affected” and logistics companies have been “refusing to handle magnets.” That firm supplies customers in varied fields, including industrial filtration, food, electronic parts, magnetic separators, and apparel.
Beijing has also widened controls on various strategic materials in the last 2 years, vital for chip production, in response to the US limits. These include germanium, graphite, tungsten, gallium, and antimony.
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