By Zhang Mengying
Investing.com – China’s factory activities expanded in June, for the first time since February, as authorities lifted COVID lockdowns in major cities such as Shanghai.
Official data from the National Bureau of Statistics (NBS) showed that manufacturing purchasing managers’ index (PMI) rose to 50.2 in June from 49.6 in May. Forecasts prepared by Investing.com predicted the index to be 50.5.
With COVID-19 lockdowns imposed on major cities such as Shanghai being rolled back, China’s factory activities showed a sign of reviving. However, headwinds persist, including a subdued property market, weak consumer confidence, and fears of recurring waves of outbreaks.
“Today’s NBS numbers were encouraging to see, even if manufacturing slightly underwhelmed and expectations were for an improvement given the easing of lockdown restrictions,” City Index senior market analyst Matt Simpson told Reuters.
A sub-index for production stood at 52.8, the highest since March 2021. New orders also expanded for the first time in four months.
“Even though the manufacturing sector continued to recover this month, 49.3% of the companies' reported orders were insufficient,” said Zhu Hong, senior statistician at NBS.
“Soft market demand is still the main problem facing the manufacturing industry,” Zhu added.
"Some firms have faced a squeeze in their profit margins, and relatively huge operating difficulties.”
Analysts expect a further rebound in China for the third quarter, although they think the official GDP target of around 5.5% for this year will be difficult to achieve.
“This surge of economic activities will likely keep the momentum into July, as further relaxation of mobility restriction takes place,” Pinpoint Asset Management chief economist Zhang Zhiwei told Reuters.
“Nonetheless, China is sticking to the zero-COVID policy stance. I think this means the economic growth will likely stay below its potential before the policy is further relaxed.”
China took a surprise move Tuesday to cut quarantine times for inbound travelers to seven days from 14 days in centralized quarantine facilities. The step lifted market hopes of China’s shift to another COVID-19 strategy which could cost less economic damage.
However, President Xi Jinping said zero COVID is still the most “economic and effective” policy for China.