02-01-2019

The partial shutdown of the U.S. Government began on Dec 22, due to the failure of passing the appropriations legislation funding federal government operations and agencies. President Trump and the Democratic Party have not reached a consensus regarding the funding for physical wall along the border with Mexico. The former threatened a prolonged government shutdown if the Congress didn’t pass appropriation legislation including the $5 billion funding. Due to the urgency of domestic political event, the Trump administration is not expected to deal with Sino-US trade war issue in the short term. In the wake of trade war, Chinese’s manufacturing activity contracted in December, first time since the last two years. The December official manufacturing Purchasing Managers' Index (“PMI”) contracted to 49.4, reaching a 34-month low; while the Caixin manufacturing PMI, which reflects the operating conditions of small and medium-sized enterprises (SMEs), also fell to 49.7, hitting a 19-month low. Both indices were inferior to market expectations, indicating that the impact of the Sino-US trade war has begun to affect the real economy. In addition, the previous Central Economic Work Conference did not stipulate a clear supportive measures, which further weaken the market atmosphere. Unless there is a breakthrough in the Sino-US trade war or a large-scale supportive measures released by the Central Government, the current weak trend is not expected to reverse shortly.

Reference:
Bloomberg
Caixin
National Bureau of Statistics of China

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