China’s Slowdown Deepens as Trade War Takes a Toll

As the trade war between the United States (SPY) (VTI) and China (FXI) continues to escalate, China’s growth prospects are expected to be more affected than those of the United States. The impact is also visible in the country’s trade and economic data.

China’s manufacturing growth in October was at its weakest level in the last two years. Its official manufacturing PMI came in at 50.2 compared to economists’ expectation of 50.6. The figure was also lower than the September reading of 50.8. The PMI reading for China was the lowest since July 2016.

The country’s GDP grew 6.5% in the third quarter, which is the slowest expansion rate since 2009. China’s GDP growth rate hasn’t suddenly decelerated. Since China accounts for roughly half of the global demand for most metals, concerns regarding China’s economic growth (FXI) and metals have surfaced.

What’s interesting to note is that despite weaker-than-expected Chinese data, iron ore prices (COMT) are holding their ground. Iron ore prices have rebounded 21% since early July, while copper prices have plunged ~15% since reaching their peak in June. Aluminum prices have slumped by 20% since reaching their high point in April 2018.

We’ll discuss the probable reasons for stable prices in the next part of this series.