The winds of change are blowing in Beijing.
Hopefully, they’ll help with all the smog.
In fact, that’s one of the primary reason’s China’s capital is planning to shut down approximately 1,000 local manufacturing firms by 2020. The government is aiming to curb pollution in the heavily populated region, as well as boost income in neighboring regions.
According to the Communist Party paper, People’s Daily, Beijing has already rejected registration applications from 19,500 firms and shut down or relocated 2,465 so-called “ordinary” manufacturers, which the Chinese government contrasts with dynamic and high-tech industries that the city is pursuing. The government is also concerned that competition between the three jurisdictions in the Beijing-Tianjin-Hebei region is wasting resources, in addition to creating overcapacity and pollution.
China launched a plan to improve the region in 2014. According to a Hebei province official who spoke to Reuters, average incomes in Hebei have increased 41 percent since 2013, though they're still only half the level in Beijing.
This comes in the wake of reports that China’s manufacturing activity is weakening. The official manufacturing Purchasing Managers’ Index fell more sharply in July than expected, though overall manufacturing activity is still expanding. The PMI dropped from 51.5 to 51.2—50 is the dividing line between expansion and contraction.
Although one might be inclined to attribute these changes to ongoing US-China trade dispute—and especially the escalating tariffs—the measure of China’s export orders was relatively steady, though new orders did remain in contraction. For the moment, the weaker Chinese currency appears to be offsetting US tariffs. It remains to be seen whether that will be sufficient for Q3.
For more in-depth coverage of the trade war, check out our feature: Steel Squeeze – A Look at How the Trump Tariffs Could Impact Manufacturing in North America.