China’s Factory Activity Contracts in July as COVID Flares Up

China’s factory activity contracted in July after bouncing back from lockdowns the month before.

This is said to be a result of fresh virus flare-ups and a negative global outlook, says a report on Voice of America.

The official manufacturing purchasing managers’ Index (PMI) dropped to 49.0 in July down from 50.2 in June largely because of continued contraction in the energy-intensive industries, such as petrol, coking coal and ferrous metals, the National Bureau of Statistics (NBS) said.

“The level of economic prosperity in China has fallen, the foundation for recovery still needs consolidation,” the report quotes NBS senior statistician Zhao Qinghe as saying in a post on the NBS website.

Weak demand has constrained recovery, Bruce Pang, chief economist and head of research at Jones Lang Lasalle Inc, said in a research note. “Q3 growth may face greater challenges than expected, as recovery is slow and fragile,” he added.

China’s economy barely grew in the second quarter amid widespread lockdowns, and top leaders recently signalled their strict zero-COVID policy would remain a top priority.

Policymakers are prepared to miss their GDP growth target of “around 5.5%” for this year, state media reported after a high-level meeting of the ruling Communist Party.

Beijing’s decision to drop mention of the target has doused speculation that the authorities would roll out massive stimulus measures, as they often have in previous downturns.
Faltering recovery

After a rebound in June, the recovery in the world’s second-biggest economy has faltered as COVID flare-ups led to tightening curbs on activity in some cities, while the once mighty property market lurches from crisis to crisis.

Chinese manufacturers continue to wrestle with high raw material prices, which are squeezing profit margins, as the export outlook remains clouded with fears of a global recession.

According to World Economics, the lockdown measures had some impact on 41% of Chinese companies in July, though its index of manufacturing business confidence rose significantly from 50.2 in June to 51.7 in July.

—- VOA report