PMI: China’s economy has had its best month since Covid restrictions were put in place in March

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.

Polls show the latest signs of a recovery in China’s economy as the country gradually reopens for business after months of wide-ranging Covid lockdowns.

“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.

Many cities, including mainland China’s business center Shanghai, have been under strict Covid restrictions since March, resulting in a sharp contraction in economic activity. People were locked in their homes, shops and restaurants were closed, and factories closed. Analysts fear that the Chinese economy will contract in the second quarter, making the government’s annual target of 5.5% for 2022 unattainable.
Signs of an economic downturn and soaring unemployment have alarmed senior government officials, who have taken steps to ease Covid restrictions and boost confidence.
Premier Li Keqiang is No. 2 in the hierarchy of the Chinese Communist Party. has repeatedly sounded the alarm about rising unemployment in recent months and urged the government to take stronger steps to support businesses and stabilize growth.
Monday Lee visited a vocational training center in Beijing and stressed the need to “get the economy back on track as soon as possible” and to “reduce unemployment as quickly as possible”.

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.

China cuts travel quarantine but maintains zero covid approach

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.

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