The Chinese government’s purchasing managers’ index (PMI) for manufacturing — which mainly covers larger businesses and state-owned companies — rose to 50.2 in June, the first time it has crossed the 50 mark since February, according to the National Bureau of Statistics. A reading above 50 indicates that activity is increasing.
Meanwhile, the official non-manufacturing PMI, which includes construction and services industries, jumped to 54.7 in June, compared with 47.8 in May. It was also the first time the index has moved back into expansion territory in four months, and its strongest reading since May 2021.
“The official PMIs point to a surprisingly rapid recovery in services activity this month after virus restrictions were mostly lifted,” said Julian Evans-Pritchard, senior China economist for Capital Economics.
But he also pointed to continued weakness in the labor market, warning that it means household finances and consumer confidence remain fragile.
“Once the reopening boost fades, this will weigh on any further recovery,” he added in a research note.
Earlier this month, many cities lifted their lockdowns or relaxed Covid-related curbs, including Shanghai.
On Tuesday, the National Health Commission said China will cut the quarantine period for international travelers by more than half, a major shift in the country’s Covid policy.
But analysts fear that China may stick to harsh Covid restrictions for a while.
On Wednesday, China’s President Xi Jinping reaffirmed his commitment to the zero-Covid policy during a visit to Wuhan, the epicenter of the coronavirus outbreak. Xi said he would rather “temporarily sacrifice a little economic growth” than “harm people’s health,” according to state-run news agency Xinhua.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, expected the recent surge in China’s economic activity to be sustained into July, as further relaxation of mobility restriction takes place. But Xi’s adherence to the zero-Covid stance would keep a lid on growth, he added.
“China is sticking to the zero Covid policy stance. I think this means economic growth will likely stay below its potential before the policy is further relaxed, ” Zhang said.
— CNN’s Yong Xiong in Seoul and Beijing bureau contributed to the report.
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