🔹 Chinese factory activity contracted for the third consecutive month in June

🔹 U.S. exports dropped sharply, but new export orders slightly rebounded after trade truce

🔹 Beijing’s export controls now affect more than just rare earths, burdening global supply chains

🔹 Domestic demand weakens, deflation pressures intensify, and real estate prices keep falling

Despite a recent tariff truce with the United States, China’s economy continues to face serious challenges. Industrial activity declined for the third month in a row in June, with the PMI index hitting 49.7—still below the 50-point threshold that separates growth from contraction, according to the National Bureau of Statistics.

While the rollback of some tariffs helped boost export orders slightly, the overall trade outlook remains uncertain. Chinese exports to the U.S. dropped the most since the onset of the COVID-19 pandemic in May. The export orders PMI stayed at 47.7 in June—higher than the April low but still in contraction territory.

Economists point to weak domestic demand as a key issue. Consumer price growth slowed for four consecutive months through May, and home prices continue to decline. According to Dan Wang of Eurasia Group, “Deflation in China is deepening, and price wars across sectors are intensifying.”

Manufacturing Struggles as Services and Construction Barely Grow

While the manufacturing sector struggles, non-manufacturing activity saw modest improvement. The composite PMI—which includes services and construction—rose to 50.7 in June. Construction posted stronger growth (52.8), but it’s not enough to offset industrial losses.

Zhiwei Zhang of Pinpoint Asset Management warned that the labor market remains under pressure and that deflationary forces persist. The central bank continues to cut interest rates to stimulate confidence, but consumer sentiment remains weak.

China Expands Export Controls—Disruptions Extend Beyond Rare Earths

Despite the Geneva trade truce, new complications arise. Export limits initially targeted rare earth metals but have now been broadened to include products not listed in the original regulations. Chinese authorities are requiring licenses and third-party chemical testing even for materials not previously under control.

Both Chinese and Western company representatives report increased difficulties, with logistics firms refusing to handle magnetic materials. One Chinese supplier stated their company was “heavily impacted” and noted disruption across industrial filtration, food processing, electronics, magnetic separation, and clothing sectors.

Beijing Tightens Control Over Strategic Chip-Making Materials

Beyond magnets, China has expanded export restrictions on strategic materials vital for chip production—including germanium, graphite, tungsten, gallium, and antimony. These measures, viewed as a response to U.S. sanctions, raise tension across global supply chains.

Summary: Despite diplomatic progress, China’s economy remains under strain. Manufacturing is shrinking, deflation is deepening, and consumers remain cautious. Meanwhile, expanded export controls add pressure to global trade routes. Beijing faces a tough balancing act between economic stimulus and regulatory tightening.



#ChinaEconomy , #china , #TradeWars , #chinavsusa , #TradingCommunity

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