BEIJING, May 31, 2020 (BSS/AFP) – Factory activity in China expanded at a
slower pace in May as the country attempts to get back on track after the
coronavirus, official data showed Sunday, with the global economic slump
making the sector’s recovery difficult.
China’s factories have stirred back to life after the lifting of strict
lockdown measures imposed when the deadly pathogen surfaced in the central
city of Wuhan, but the spread of the virus worldwide has dragged down key
foreign markets — weighing heavily on Chinese exports.
The Purchasing Managers’ Index (PMI), a key gauge of activity in China’s
factories, was at 50.6 points in May, remaining above the 50-point mark
separating growth from contraction each month.
But the figure was down slightly from 50.8 the month before, and 52.0 in
March, according to the National Bureau of Statistics (NBS).
NBS senior statistician Zhao Qinghe pointed to weakness in China’s imports
and exports, saying “the epidemic situation and economic situation globally
remain severe and complex, and foreign market demand is still shrinking”.
Zhao said indexes on new export orders and imports remained at relatively
low levels.
The “momentum of economic recovery is steady and improving”, Zhao added,
but there is weakness in some industries such as textiles and apparel.
Non-manufacturing PMI was at 53.6 in May, a slight increase from the month
before, with the NBS flagging that the construction and service industries are
showing signs of recovery.
Business activity in the cultural, sports and entertainment industry,
however, remains low with many entertainment venues still closed amid fears of
a second wave of COVID-19 infections.
Nomura analysts said in a report this week that “with economic growth in
the major economies of Europe and the Americas set to drop by around 15
percent year-on-year in the second quarter, China’s exports seem poised to
fall”.
They added that even with exports of coronavirus-related medical supplies
providing a boost in recent weeks, this is not likely to offset external
challenges.
It is also likely to be “unsustainable” as new cases peak and more
countries ramp up their own production of goods, they said.
Iris Pang, ING chief economist for Greater China, told AFP that the above-
50 figure in May suggested “there was some domestic demand pick-up”
compensating for weak markets overseas.
But she flagged challenges ahead, saying there would be a potential
trickle-down effect on spending and local demand if job losses grew and
domestic sectors could not provide sufficient work for people laid off.
Policymakers have long sought to wean China off cheap exports and
government spending in favour of domestic consumption, although it is unclear
if this will yield results.