Chinese factory activity slowed in October, official data showed Wednesday, adding to a growing list of bad news for the Asian giant as it struggles to maintain economic momentum in the face of US tariffs and a weakening yuan. The Purchasing Managers’ Index (PMI), a key gauge of factory conditions, came in at 50.2 for the month, down from 50.8 in September, the National Bureau of Statistics said. The figure was also below the 50.6 reading tipped in a Bloomberg News survey of economists, though it was still slightly above the 50-point mark that separates expansion from contraction. The figures are the latest sign that the world’s second-largest economy is losing momentum as it faces challenges at both home and abroad — from a trade war with the US to a massive debt buildup. “All the numbers from China’s PMI release today confirm a broad-based decline in economic activity,” ANZ’s Raymond Yeung said in a research note. “Economic conditions facing China’s private sector are much worse than what the headline figure suggests,” he warned, noting that a closer analysis of the figures shows that manufacturing by small and medium-sized businesses actually contracted in October. Chinese economic growth slowed to 6.5 percent in the third quarter, down from a high of 6.8 percent this year. The number was in line with Beijing’s annual target. But more downward pressure could threaten the country’s key political goals of eliminating poverty by 2020 and building a “moderately prosperous society”. American tariffs on virtually all Chinese imports have sapped confidence in Beijing’s ability to maintain current growth levels. Analysts say that the country’s overleveraged companies and local governments are likely to put a further drag on expansion. China’s ailing stock markets have made the concerns even more acute, Yeung said, noting that “risks related to stock-pledged lending have escalated due to the fall in Chinese equities”. Offering stock as collateral for loans is a common practice in China. Further complicating the picture is the falling price of the yuan against the dollar, with the unit at its lowest level in a decade. A weaker yuan makes Chinese exports less expensive overseas, offsetting some of the higher costs brought by the US tariffs but it has also driven up the cost of critical raw materials from abroad and threatened domestic confidence in the currency, driving some investors to move assets overseas. China to set up recall system for polluting cars China’s market regulator will set up a system to recall vehicles that violate the country’s pollution and emissions standards, it said on Wednesday, with cars now the biggest source of smog in major cities. China’s air quality is going to come under even further pressure, with another 100 million vehicles set to ply its roads in the coming five years, the State Administration for Market Regulation said in comments posted on its website. The nation’s newly revised air pollution law includes provisions to recall vehicles that fail to meet state emissions standards, it said, and it has already studied similar product recall systems in the United States, Europe and Japan. The regulator is currently studying key issues like the identification of equipment defects and the quality of key components used in reducing engine emissions, but it will work with the environment ministry to draw up new legislation and aims to implement the new system as soon as possible. Though China has been cracking down on factory emissions and curbing the consumption of coal, vehicle pollution remains a growing problem, increasing lung-damaging, ground-level ozone levels in many major cities. China’s total vehicle fleet reached 310 million last year, and cars were responsible for about 45 percent of air pollution in the capital, Beijing, and nearly 30 percent in Shanghai, according to figures from the Ministry of Ecology and Environment earlier this year. China eliminated more than 20 million old and substandard vehicles from its roads last year to cut pollution, and it has also banned the sale of low-grade, high-emissions diesel. Its “China VI” fuel standards, which are tougher than those used in the European Union, have already been introduced in the Beijing-Tianjin-Hebei region – known for its heavy smog – and will be made mandatory nationwide at the beginning of next year. Top refiner Sinopec is upgrading its refineries to produce fuel to comply with the new standards. But enforcing the standards has been a challenge, with fraudulent practices believed to be widespread. Some garages have been found selling equipment to cheat fuel quality detectors, and the environment ministry said in July it had shut as many as 639 substandard vehicle testing stations last year. The ministry also fined two truck makers late last year for manufacturing and selling vehicles that failed to meet environmental standards. Published in Daily Times, November 1st 2018.