After turbulence last week related to trade tensions, Asian markets started Monday in positive territory. Promising economic data from Chinese vast manufacturing sector drove confidence.
Despite ongoing tariffs, China grew its manufacturing output last month. The Caixin-Markit Purchasing Managers’ Index grew from 51.7 to 51.8 for November, a positive sign for the manufacturing sector. China’s official government data saw manufacturing PMI grow from 49.3 to 50.2, the best it has been in eight months. This was the first time since April that China saw growth in manufacturing.
Has Chinese Manufacturing Sector Bottomed Out?
Some investors see the latest data as a sign that China’s manufacturing sector has already seen its lowest levels and will only continue to grow from here. However, there are analysts who don’t believe that troubles are over.
China still has challenges to overcome. Domestic consumer demand has weakened, which has put a strain on top local brands. The ongoing trade war is also a constant headwind. With tariffs in place, China is less competitive in the United States. If tariffs are not removed with a long-term trade deal, then China could lose some of its manufacturing business to competing nations in South East Asia, or even to newly formed American manufacturers, depending on how the situation progresses.
China has also seen a slowdown in its property sector.
Should American Investors Be Concerned About Chinese Performance?
The big question here is whether American investors should be concerned with news of the Chinese economy. The short answer is yes.
China is a major consumer of American products, especially when it comes to technology. It is one of the largest users of American chips and patents in smartphones and computer devices. Chinese consumers are also a major source of revenue for companies like Microsoft and Apple. China’s home building and infrastructure industries rely heavily on American technology and machinery.
Even the aerospace industry is dominated by American companies. Boeing controls 50% of the Chinese commercial aircraft market. In food and beverages, there are major American players. Coca-Cola has 61.5% of the soda industry, while KFC has 40% of the fast-food industry.
When the Chinese economy falters, American businesses and investors will eventually feel the damage. This is why positive news in manufacturing could contribute to a positive session of trading in American stocks today.
You may be interested
FAA Says Boeing 737 MAX Won’t be Flying in 2019Adam R - December 12, 2019
Boeing (NYSE: BA) troubled 737 MAX jets will not be back in the air in 2019, according to the latest…
Latest Jobs Report Has Reinvigorated the Bull MarketAdam R - December 9, 2019
After a week of trade tensions and slides in the stock market, Friday came with some great news. The non-farm…
General Motors Building a New Electric Vehicle Battery FactoryBecky H - December 6, 2019
General Motors Co. (NYSE: GM) is working to secure its position as an electric vehicle leader with a new battery…