As China industry slows, effects felt worldwide

China's manufacturing engine lost further momentum in July and the job market weakened, a survey showed on Wednesday, complicating a transition to consumer-driven growth and boding ill for so many leveraged to the world's second-largest economy.

The knock-on effects are already being felt more and more widely - from a slowdown in Japanese export growth despite a weaker yen, to Apple lamenting a rare drop in Chinese demand for its premium brand of gadgets. "China's slowdown is starting to become more dangerous," warned Yasuo Yamamoto, a senior economist at Mizuho Research Institute in Tokyo.

Since taking office in March, China's new leaders have said they are prepared to tolerate tamer growth and push a restructuring of the economy toward domestic consumption, but there have been mixed messages on how much of a slowing they would tolerate.

The flow of data suggests their task of changing the shape of the massive economy will only get harder.

Wednesday's flash HSBC/Markit Purchasing Managers' Index showed output, employment and new orders all declining at a faster pace in July.

The overall index of business conditions fell to 47.7 from June's final reading of 48.2, a third straight month below the watershed 50 line which divides expansion from contraction and the weakest level since August 2012.

The employment sub-index slid to 47.3 in July, the weakest since the depths of the global financial crisis in early 2009.

"This print could reignite fears of a Chinese hard landing," said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore.

China's economy grew 7.5 per cent in April-June from a year earlier, the ninth quarter of slowdown in the past 10 quarters.

A global drag
China has become such a major importer of goods that any weakness in demand is increasingly felt worldwide.

Japan on Wednesday reported annual growth in its exports to China eased to 4.8 per cent in June from 8.3 per cent in May.

The same goes for commodity exporters. China consumes around half of the world's iron ore and coal and 30 to 40 per cent of global production of base metals such as copper.

London copper futures fell from one-month peaks in the wake of Wednesday's data, while the Australian dollar took a knock as China is the country's single biggest export market.