Chinese government The Purchasing Managers Index (PMI) for manufacturing, which mainly covers large enterprises and state-owned companies, rose to 50.2 in June, breaking the 50 mark for the first time. since February, according to the National Bureau of Statistics. A value above 50 indicates an increase in activity.
Meanwhile, the official non-manufacturing PMI, which includes construction and services, jumped to 54.7 in June from 47.8 in May. It was also the first time index has returned to expansion territory in four months, and this is the strongest value since May 2021.
“Official PMIs point to a surprisingly fast recovery in services activity this month after virus lockdowns were largely lifted,” said Julian Evans-Pritchard, senior China economist at Capital Economics.
But he also pointed to continued weakness in the labor market, warning that this means household finances and consumer confidence remain fragile.
“Once the reopening momentum wears off, any further recovery will be affected,” he added in a research note.
Earlier this month, many cities removed or relaxed Covid-related restrictions, including Shanghai.
On Tuesday, the National Health Commission said China will cut the quarantine period for international travelers by more than half, a major change in the country’s Covid policy.
But analysts fear that China may stick to tight Covid restrictions for a while.
On Wednesday, Chinese President Xi Jinping reaffirmed his commitment to a zero-spread Covid policy during a visit to Wuhan, the epicenter of the coronavirus outbreak. Xi said he would “temporarily sacrifice a little economic growth” rather than “harm people’s health,” the state-run Xinhua news agency reported.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, expects China’s recent surge in economic activity to continue into July as restrictions on mobility further ease. But Xi’s commitment to a zero-Covid stance will hold back growth, he added.
“China has a zero Covid policy. I think this means that economic growth is likely to remain below its potential before policies are further eased,” Zhang said.
– Yun Xiong of CNN’s Seoul and Beijing Bureau contributed to the report.