Sur­vey shows factory ac­tiv­i­ties grow­ing at a steady clip in June

China Daily (Hong Kong) - - BUSINESS - By LI XIANG lix­i­ang@chi­

China’s man­u­fac­tur­ing sec­tor ex­panded at the fastest pace so far this year in June as eco­nomic ac­tiv­ity grad­u­ally re­turned to nor­mal in the coun­try, a pri­vate sur­vey showed on Wed­nes­day.

The Caixin China Gen­eral Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex rose to 51.2 from 50.7 in May, the high­est read­ing this year, ac­cord­ing to a sur­vey re­leased by me­dia group Caixin. An in­dex read­ing above 50 rep­re­sents an expansion while one be­low re­flects con­trac­tion.

The sur­vey showed that China’s man­u­fac­tur­ing sec­tor has been in expansion for four con­sec­u­tive months as do­mes­tic de­mand has sub­stan­tially im­proved. The gauge for new or­ders jumped to 52.1 from 49.7 in May, en­ter­ing the expansion ter­ri­tory for the first time this year.

The read­ing of the Caixin man­u­fac­tur­ing PMI was in line with the of­fi­cial PMI re­leased by the Na­tional Bureau of Sta­tis­tics on Tues­day which also showed that the coun­try’s factory ac­tiv­ity ex­panded at a faster pace in June.

The PMI data in­di­cated that China’s econ­omy con­tin­ues to re­cover with both sup­ply and de­mand im­prov­ing, said Wang Zhe, se­nior econ­o­mist at Caixin In­sight Group.

“While some cities saw a re­bound of COVID-19 cases since mid-June, the over­all im­pact is likely to be lim­ited. Com­pa­nies are still con­fi­dent about loos­ened dis­ease con­trol and preven­tion mea­sures and the econ­omy will grad­u­ally re­turn to nor­mal,” Wang said.

But Wang warned about per­sis­tent pres­sure on em­ploy­ment and said that en­sur­ing sta­bil­ity in the job mar­ket will con­tinue to be a daunt­ing task for the govern­ment.

The sub-in­dex of em­ploy­ment re­leased by Caixin de­clined to 48.6 from 49.2 in May, which still lingers in the con­trac­tion ter­ri­tory, be­low 50, and points to stronger down­ward pres­sure in the job mar­ket, econ­o­mists said.

Lu Ting, chief China econ­o­mist with No­mura Se­cu­ri­ties, said in a re­search note that the Caixin man­u­fac­tur­ing PMI sur­prised the mar­ket and sug­gested some good short­term mo­men­tum for a re­cov­ery.

“Like the of­fi­cial man­u­fac­tur­ing PMI, the im­prove­ment in the June Caixin man­u­fac­tur­ing PMI was mainly driven by a jump in new ex­port or­ders,” he said.

The faster expansion in the man­u­fac­tur­ing sec­tor has prompted No­mura Se­cu­ri­ties to raise its fore­cast for China’s GDP for the sec­ond quar­ter from 1.2 per­cent to 2.6 per­cent on a yearly ba­sis.

De­spite the im­prove­ment in new ex­port or­ders, Lu warned that the read­ing was still be­low 50, which sug­gested still-strong head­winds from weak­en­ing ex­ter­nal de­mand. The risk of re­cur­rent waves of COVID-19 cases in over­seas mar­kets may con­tinue to dim China’s ex­port outlook, he said.

Xu Hong­cai, deputy direc­tor of the eco­nomic pol­icy com­mit­tee of the China As­so­ci­a­tion of Pol­icy Sciences, said that China is likely to main­tain the strong re­cov­ery mo­men­tum in the sec­ond half of the year as ma­jor in­di­ca­tors for pro­duc­tion and con­sump­tion point to a steady re­bound.

Xu ex­pects the coun­try to achieve GDP growth of about 1 per­cent to 2 per­cent this year as fa­vor­able govern­ment poli­cies will con­tinue to fa­cil­i­tate re­form and open­ing-up.

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