According to surveys published Thursday, China’s massive industrial and service industries just saw their first month of growth since February, as Covid restrictions were loosened in numerous locations.
However, the threat of more lockdowns lurks over the world’s second largest economy, as Beijing sends confusing signals about the best way to deal with the Covid pandemic.
According to the National Bureau of Statistics, the Chinese government’s purchasing managers’ index (PMI) for manufacturing, which mostly covers larger corporations and state-owned enterprises, increased to 50.2 in June, the first time it has risen above 50 since February. A value of 50 or higher suggests that activity is growing.
Meanwhile, the official non-manufacturing PMI, which includes the construction and services sectors, increased to 54.7 in June from 47.8 in May. It was also the index’s first return to expansion territory in four months, and its highest value since May 2021.
The surveys are the most recent indicators of economic resurgence in China, as the country increasingly reopens for business after months of widespread Covid lockdowns.
“The official PMIs point to a surprisingly rapid recovery in services activity this month after virus restrictions were mostly lifted,” said Julian Evans-Pritchard, senior China economist for Capital Economics.
However, he noted that the job market is weak, implying that household finances and consumer confidence remain shaky.
“Once the reopening boost fades, this will weigh on any further recovery,” he added in a research note.
Since March, many cities, including mainland China’s corporate powerhouse Shanghai, have been subject to tight Covid restrictions, leading in a dramatic decrease in economic activity. People were confined to their houses, businesses and restaurants were closed, and factories were shut down. Analysts are concerned that the Chinese economy may decline in the second quarter, putting the government’s 5.5 per cent annual growth objective for 2022 out of reach.
Top government officials have been spooked by signs of an economic slowdown and growing unemployment, prompting them to ease Covid limits and bolster confidence.
Premier Li Keqiang, China’s Communist Party’s No. 2 in the hierarchy, has regularly raised the alarm over rising unemployment in recent months, urging the government to take tougher measures to assist business and stabilise GDP.
On Monday, Li visited a job training centre in Beijing, emphasising the importance of “getting the economy back on track as soon as feasible” and “bringing down unemployment as soon as possible.”
Many cities, including Shanghai, removed lockdowns or reduced Covid-related restrictions earlier this month.
The National Health Commission announced on Tuesday that China will reduce the quarantine period for international travellers by more than half, a significant shift in the country’s Covid policy.
However, researchers believe that China will continue to impose tough Covid restrictions for the foreseeable future.
During a visit to Wuhan, the epicentre of the coronavirus outbreak, China’s President Xi Jinping reaffirmed his commitment to the zero-Covid policy on Wednesday.
According to the state-run news agency Xinhua, Xi stated that he would rather “temporarily lose a little economic growth” than “hurt people’s health.”
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, predicted that the recent spike in China’s economic activity will continue into July if mobility restrictions were eased further. However, Xi’s adherence to the zero-Covid approach will limit growth, he added.
“China is sticking to the zero Covid policy stance. I think this means economic growth will likely stay below its potential before the policy is further relaxed, ” Zhang said.
(Adapted from CNN.com)