China factory activity slows down in April as challenges for recovery loom

China’s manufacturing sector contracted in April according to official figures published on Sunday. This was due to the slow recovery of domestic production and the tapering down of global demand after Covid restrictions were lifted.

The National Bureau of Statistics’ (NBS) data showed that the official purchasing managers’ (PMI) index, a key indicator of Chinese factory output, unexpectedly fell to 49.2 points in April, down from 51.9. This was below the 50-point threshold which distinguishes between expansion and contraction.

Bloomberg News surveyed analysts who expected April factory output to be 51.4.

The decrease comes after February, which recorded the highest readings in over a decade. This was due to factories returning to normality following an increase in Covid cases.

China’s economy has grown by 4.5 percent during the first quarter of this year. The country reopened its doors after removing strict health controls which helped to keep the coronavirus under control but also harmed businesses and supply chain.

The second-largest global economy, however, is also beset with a series other crises. From a debt-laden real estate sector to a flagging consumer’s confidence, global inflation and the threat of recession in other countries, as well as geopolitical tensions between the United States and the rest of the world.

The official PMI (Productivity Measurement Index) for the non-manufacturing sector, which measures growth within the construction and services sectors, has fallen to 56.4, from 58.2 last March.

The reading for March was the highest recorded since May 2011. This is because the country experienced a surge of demand for leisure and travel services that were unavailable for almost three years due to the pandemic.

Premier Li Qiang warned that it would be difficult to reach the government’s modest five percent growth goal for this year.

In a Friday statement, the Communist Party’s highest policy-making body stated that the economy was still facing headwinds due to the weak domestic demand and the slow reform pace.

According to a report from the state-run Xinhua News Agency, the Politburo stated that “China’s economic recovery is mainly underway, but (internal driving forces) are still weak, and the demand is insufficient.”

“Economic Transition and Upgrade Face New Headwinds”

– Travel rush –

Beijing has promised to continue state support for private industry, which is still suffering from the regulatory crackdowns on property, technology, and private education.

China’s export- and manufacturing-related sectors are suffering from a lackluster global demand.

In recent months, households have been spending their accumulated savings on travel.

The number of bookings made for hotel rooms, train tickets and air tickets for the five day Labor Day holiday that begins Saturday has surpassed those recorded for the same period last year before the pandemic.

Zhang Zhiwei said, “China’s manufacturing sector is showing signs of a slowdown, while the service sector in China continues to grow.”

“These mixed messages will likely keep pressure on the Government to continue its supportive fiscal policies and monetary policies during the second quarter,” said he.

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