Factory activity in China contracted for the second straight month in June, according to data released on Sunday, underscoring the country’s shaky economic recovery ahead of a key political gathering expected to focus on deepening reform. The manufacturing purchasing managers’ index (PMI) – a key measure of factory output – registered at 49.5 in June, identical to May’s figure, according to the National Bureau of Statistics (NBS). The latest official index was in line with a Bloomberg forecast based on a survey of economists. A PMI figure below 50 indicates a decline in activity, while anything above indicates an expansion.
Policymakers are due to convene in the capital Beijing in mid-July for a highly anticipated political gathering expected to focus on economic recovery. Contraction in the manufacturing sector is a worrying sign for the world’s second-largest economy, which has struggled to regain momentum since late 2022, when Beijing scrapped tough pandemic policies that had weighed heavily on growth.
China’s non-manufacturing PMI – which takes activity in the services sector into account – expanded in June at 50.5, the NBS also said Sunday. But despite the growth, that figure represented a drop from the 51.1 notched the previous month and was also lower than the 51.0 forecast by Bloomberg’s survey. NBS statistician Zhao Qinghe cautioned in a statement Sunday that while the country had “maintained overall expansion” in June, “the foundation for continuing recovery and improvement still must be consolidated”.
Among the hurdles policymakers face are a prolonged debt crisis in the once-roaring property sector, sluggish consumption, and high unemployment – particularly among youth. Chinese President Xi Jinping said in a speech on Friday that officials were eyeing “major” reforms that would “form a more market-oriented, legal and international business environment”.
