After the end of the strict corona policy in China, an upswing was actually expected. But the economic recovery is progressing more slowly than expected. The prospects are clouding over.
The economic recovery in China has slowed. Important leading economic indicators were worse than expected in May. The purchasing managers’ index (PMI) in the manufacturing sector fell for the second month in a row, falling from 49.2 to 48.8 points, the Chinese statistics office announced in Beijing on Wednesday. A value below the 50-point limit indicates a negative business development. The PMI even slipped to its lowest level in five months.
China’s non-manufacturing sector also lost momentum, according to May data. The index for the service industry remained in the expansive area, but also fell from 56.4 to 54.5 points, as reported by the statistical office. Both leading indicators were thus below the forecasts of experts.
Many reasons for cooling the second largest National economy
The reasons for the slowdown in the second largest economy in the second quarter are manifold: Export growth has deteriorated. The recovery of the battered real estate market is weaker. The government has also slowed infrastructure spending. Businesses are suffering from falling profits and rising political tensions with the US and its allies.
After the end of the strict corona policy, the Chinese government is aiming for an economic upswing this year. In the first quarter, economic growth was 4.5 percent compared to the same period last year. The management has set a growth target of “around five percent” for the year as a whole.
Timid upswing starts to stutter
The latest data is increasing pressure on policymakers to shore up patchy economic recovery: China’s economy continues to recover unevenly after three years of pandemic stagnation. As early as April, purchasing managers’ indices and other economic indicators indicated that the tentative recovery after the end of the corona pandemic was faltering in many areas. The two analysts Nomura and Barclays have already lowered their forecasts for Chinese GDP growth in 2023.