China’s National Bureau of Statistics (NBS) has revealed that growth continued in the nation’s manufacturing sector, but below analyst expectations.
The first nation to struggle with the Covid-19 crisis and the economic devastation wrought in its wake, China has suffered its first quarter of economic contraction since the 1970s.
The second-largest economy on Earth was also the first to reopen following a widespread government-enforced lockdown.
Investors around the world, unsure of the feasibility of the much discussed V-shaped rapid recovery, have closely monitored China’s reopening, hoping to gauge what lies in store for the other nations that followed the lockdown strategy.
With Chinese manufacturing PMI falling from 50.8 in April to 50.6 in May, the latest figures weaken the argument that the global economy will be back on its feet quickly.
More shockingly, the manufacturing employment sub-index fell from 50.2 to 49.4, indicating that the Chinese labour market is still in turmoil.
The Chinese government has prioritised getting as many Chinese as possible back to work, after urban unemployment swelled to 6.2 per cent in February (per government statistics), Premier Li Keqiang stated: “a slight fluctuation in China’s economic growth this year is not of major significance as long as employment remains stable.”
The accuracy of China’s official government PMI figures has long been questioned, with critics arguing that the highly centralised state massages the statistics. However, the latest Caixin/Markit Manufacturing PMI data shows the opposite. The private survey found Chinese manufacturing PMI actually rose, from 49.4 the month before, to 50.7 in May.
Either way, with the global economy plunged into a recession that is expected to dwarf the Financial Crisis of 2008, China’s export-dependant economy could continue to experience mediocre growth.
Worsening tensions with its largest trading partner and rival, the United States, over Hong Kong and the culpability of the Covid-19 pandemic, could further threaten the nation’s recovery.
At the close of Monday trading, the Shanghai Composite Index (SHCOMP) closed up 2.2 per cent at 2,915.43, while Hong Kong’s Hang Seng Index (HSI) finished at 23,732.52 after a 3.36 per cent gain.