China factory activity breaks losing streak

China’s November factory activity rebounded for the first time in seven months, data showed Saturday, despite the looming threat of fresh US tariffs within weeks if Beijing and Washington fail to sign a partial trade deal.

The closely watched Purchasing Managers’ Index (PMI), a key gauge of activity in the country’s factories, rose to 50.2 in November, up from 49.3 last month, the National Bureau of Statistics said.

The reading is slightly above the 50-point mark that separates growth and contraction every month.

A sub-index of new export orders climbed to a 7-month high at 48.8, but was still in contraction as demand wanes for China’s exports abroad.

Ting Lu, chief China economist at investment bank Nomura, says  “the blip” of a rise in the official manufacturing PMI doesn’t signify a recovery in the economy.

“The jump of manufacturing PMI from 49.2 in Feb to 50.5 in March this year made the whole market very excited about a strong recovery, but it turned out to be an illusion,” said Lu.

“This time is no different.” The reading comes as Beijing and Washington edge towards a partial deal to a trade war that has dragged on for nearly 20 months.

Top US and Chinese negotiators held phone talks on Tuesday and agreed to keep in touch over  “remaining issues” for a  “phase one” trade deal between the two countries, Chinese state media said.

The two sides have slapped tariffs on nearly half a trillion dollars worth of goods in two way trade, and US President Donald Trump is threatening fresh tariffs in mid-December if there was no mini-deal.

Beijing has also implemented a number of measures to stimulate the economy, which expanded at its slowest pace in nearly three decades in the third quarter.

People’s Bank of China trimmed the interest rate it charges on funding to commercial lenders last week, to boost lending to credit-starved parts of the economy.