The growth rate of factory activity in China slowed down in May as the second largest economy of the world attempts to turn around after the economy coronavirus pandemic hit. The slowness in factory data was shown official data on Sunday which reflected the overall global economic slump which has also affected the recovery of this sector in China.
Following the relaxation of the strict lockdown measures imposed to stop the spread of the coronavirus pandemic after the deadly pathogen was first detected in the central city of Wuhan, factories in China have started to reopen and operate. But demand form the key foreign markets of Chinese goods have been dragged down because of he spread of the virus worldwide.
In May, the Purchasing Managers’ Index (PMI), a key gauge of activity in China’s factories, was at 50.6 points which was just over the 50-point mark which denotes the separation between growth and contraction. These figures are disclosed every month.
According to the National Bureau of Statistics (NBS), the figure in the previous month was slightly higher at 50.8 and was at 52.0 in March.
Weakness in China’s imports and exports was point out by NBS senior statistician Zhao Qinghe who said that “the epidemic situation and economic situation globally remain severe and complex, and foreign market demand is still shrinking”.
The indices that show new export orders and imports were also low for the month of May, Zhao said.
Zhao added that the “momentum of economic recovery is steady and improving”, but said that there are some industries such as textiles and apparel, are still showing signs of weakness. .
There was a slight improvement month on month in non-manufacturing PMI for May which came in at 53.6 and the NBS identified the construction and service industries as the ones that were exhibiting signs of a recovery.
But since many entertainment venues are still closed because of fears of a second wave of Covid-19 infections, therefore the business activities in the cultural, sports and entertainment industry were still very low.
Nomura analysts said in a report this week that “with economic growth in the major economies of Europe and the Americas set to drop by around 15 per cent year-on-year in the second quarter, China’s exports seem poised to fall”.
And even with a boost to exports because of an increase in exports of coronavirus-related medical supplies in recent week, it would not be enough to compensate for the external challenges, they added.
They further said that such a boost to exports is also likely to be “unsustainable” because of peaking of new cases and more countries are increasing domestic production of coronavirus related goods.
The above-50 figure in May suggested “there was some domestic demand pick-up” compensating for weak markets overseas, Iris Pang, ING chief economist for Greater China, told AFP.
But she also identified a number of challenges in the future and said that if there were job losses, there would be a potential trickle-down effect on spending and local demand.
(Adapted from ChannelNewsAsia.com)