Coronavirus News Asia

China’s economy flickers into life

Flickers of light are piercing the economic gloom in China. But the flame of growth could easily be snuffed out by the Covid-19 pandemic.

Official figures released by the National Bureau of Statistics on Tuesday showed that factory activity picked up again in June.

China’s Purchasing Managers’ Index, or PMI, edged higher at 50.9 compared to 50.6 in May. The non-manufacturing PMI also increased slightly to 54.4 from 53.6 with a figure above 50 classified as expansion.

“We still face uncertainties. [But] recovery momentum of the manufacturing sector was further consolidated, stimulating related business activities in the service sector,” Zhao Qinghe, a senior statistician at the NBS, said. 

Still, a clearer picture of the manufacturing industry will emerge later this week when the Caixin-IHS Markit Purchasing Managers’ Index is released. The report tends to feature a broader mix of small- and medium-sized companies.

In comparison, the official study polls a large proportion of big businesses and state-owned enterprises. Even so, “external demand” continues to be sluggish after remaining in negative territory.

“The foreign orders PMI at 42.6 in June confirms that external demand remains weak. We believe that the ongoing Covid-19 situation in the United States and Europe will keep the pressure on export orders in the coming months,” Iris Pang, the chief economist of Greater China at the multinational banking group ING, said.

“This confirms our view that small manufacturers continue to struggle to get export orders,” she added.

Obviously, this is crucial to the overall state of the economy. SMEs and the private sector as a whole account for around 80% of urban jobs and create 60% of China’s GDP growth.

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