China's vast factory sector flatlines for June as exports shrink and jobs are cut, a worrying trend evident across Asia that argues for yet more policy stimulus. As Sonia Legg reports, the hard times signalled by a range of surveys is not what the world needs a week after Britain's vote to leave the European Union.
It wasn't what the world needed after the Brexit vote. China's vast factory sector flat-lining as June exports shrink and jobs are cut. A range of surveys signalled hard times and that was despite a huge amount of economic stimulus from the Chinese authorities. (SOUNDBITE) (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING: "We were left wondering how long that would last and also about the legacy of the stimulus, the rising debt that resulted from it and what that would do to global growth in the medium to long term. So we are still quite concerned about Chinese growth - the world should be - and certainly with Brexit adding another layer of uncertainty onto world growth. We really should be quiet concerned." The services sector was up slightly (53.7) - a positive sign for consumer activity. But the index which covers many smaller Chinese firms hit a four-month low. After so much stimulus Beijing had every reason to be disappointed. So too did the Bank of Japan. Major manufacturers there are still gloomy despite aggressive easing. (SOUNDBITE) (Japanese) JAPANESE DEPUTY CHIEF CABINET SECRETARY, KOICHI HAGIUDA, SAYING: "There's a sense of caution in Japanese firms' economic outlooks, but the fact that capital investment is on the rise shows the economy is standing solid." Markets reacted by driving Japanese government bond yields deeper into negative territory. But long term Japan has a problem (SOUNDBITE) (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING: "It is very difficult to stimulate demand in a country where the population is falling and there is a resistance to increasing the workforce through imported workers or for reforming conditions to make it more able for women to join the workforce." And Japan is on Brexit alert too - volatility in currency markets a particular worry.