Factories in Guangdong contracting, PMI shows

By BLOOMBERG

BEIJING • Factories in China’s largest regional economy didn’t do well last month, raising questions about the resilience of the nation as it digs in for a prolonged trade battle with the US.

The manufacturing Purchasing Managers’ Index (PMI) for the southern Guangdong province dropped to 49.3 in August, according to the local government’s Economic and Information Commission.

That’s the first time the gauge has dropped below the line of 50 — which separates expansion and contraction — since early 2016.

Guangdong, which boasts an economy as large as Australia’s, is a major manufacturing hub and accounts for almost a third of China’s exports. It’s also home to some of the nation’s largest corporations including Tencent Holdings Ltd and Huawei Technologies Co Ltd.

The gauge shows both domestic pressure and “negative impact from rapidly changing international economic and political factors”, the government agency said in a statement on Monday.

That’s in line with the declining trend of another private factory gauge and early indicators gathered by Bloomberg, while the official nationwide manufacturing PMI unexpectedly edged up in August.

The private Caixin gauge and Guangdong’s PMI both showed that “export-oriented companies have already been affected by the trade war, and this will spread to other coastal regions”, said Bloomberg economist Qian Wan. Domestic policies will underpin the economy, yet they won’t lift exporters as much, she said.