The manufacturing Purchasing Managers’ Index (PMI) in China, which reflects the country’s economic trends, has not shown good performance for four consecutive months despite a ceasefire in the US-China trade war. The situation is attributed to climate impacts such as heatwaves and floods across the country. On the 31st, China’s National Bureau of Statistics announced that the manufacturing PMI for July recorded 49.3, a 0.4 point decrease from the previous month’s 49.7. This is the lowest figure since April and slightly below the market forecasts by Reuters and Bloomberg, which anticipated 49.7.
The PMI is an indicator that shows economic trends in relevant sectors based on surveys of corporate purchasing managers. A reading above 50 indicates economic expansion, while below 50 indicates contraction. The non-manufacturing PMI, which comprises the construction and service sectors, also fell 0.4 points to 50.1 in July from 50.5 in the previous month, barely maintaining expansion. This also fell short of Bloomberg experts’ expectations of 50.2.
By industry, the construction industry’s climate index fell to 50.6, down 2.2 points from the previous month’s 52.8, and the service industry climate index decreased by 0.1 points to 50.0 from 50.1. The composite PMI for July, including manufacturing and non-manufacturing sectors, dropped 0.5 points to 50.2 from 50.7 in the previous month.
Zhao Qinghe, a senior statistician at the National Bureau of Statistics’ Service Industry Survey Center, explained that the manufacturing industry entered a traditional off-season of production in July, and the impacts of disasters such as high temperatures, heavy rain, and floods worsened the manufacturing economy compared to the previous month, while construction activity also slowed.
Although China achieved an economic growth rate of 5.3% in the first half of this year, Bloomberg emphasized concerns about economic slowdown, which may negatively affect growth in the latter half. China’s growth target this year is around 5%.
Bloomberg also noted that the momentum for economic recovery is expected to weaken further as the year progresses, amidst ongoing deflationary pressures (economic recession with falling prices) due to weak domestic consumption. This raises the need for additional government stimulus measures.
The Chinese government continues to implement the ‘old-for-new’ policy, which supports the replacement of old products with new ones, while also rolling out measures to boost domestic demand. On the 28th, China announced its first-ever national childcare subsidy policy to increase birth rates, providing an annual 3,600 yuan (approximately 696,000 won) for children under the age of three to stimulate consumption.
Reuters also pointed out that despite the US-China trade war ceasefire, China, as the world’s second-largest economy, still has many issues to resolve, citing excessive production in major industries, a long-term downturn in the real estate market, and weak household demand.