China's manufacturing sector to slow amidst green policies

Production growth of ferrous and non-ferrous metals came in at lower levels in 2017.

China’s manufacturing sector, which accounts for an approximately 30% of the economy, is facing significant downward pressure as the administration ramps up its environmental protection policies, according to BMI Research.

This is likely to weigh on energy intensive areas of manufacturing as BMI notes that the downtrend in the production growth of non-metal mineral products, ferrous metals and non-ferrous metals came in at much lower levels of 4%, 0.4% and 1.1% YoY respectively from January to November 2017 compared with the headline production figure of 7.2% for the overall manufacturing sector over the same period.

BMI adds that investment activities in the said categories are likely to slow down over the coming quarters as the government moves to constrain its environmentally degrading activities. 

One such move includes the launch of the green development index by the National Bureau of Statistics, the National Development and Reform Commission, the Ministry of Environmental Protection and the Organisation Department of the Communist Party of China Central Committee to rank the environmental protection policies of local governments. 

However, BMI believes that China’s shift towards a greener and more sustainable manufacturing industry as laid out in its roadmap ‘Made in China 2025’ is likely to weather in on the manufacturing sector in the short-term but will gradually bear fruit over the coming years. 

Moreover, the government’s plan to intensify adoption of information technologies to enhance production under the Internet+Manufacturing initiative is likely to benefit even small manufacturers and support key projects in the sector.