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China’s factory and service sectors collapse for the first time since 2020

FILE PHOTO: A worker wearing a face mask works on a production line that makes steel bicycle rims at a factory in Hangzhou, Zhejiang
FILE PHOTO: A worker wearing a face mask works on a production line that makes steel bicycle rims at a factory in Hangzhou, Zhejiang province, China, March 2, 2020, amid the country’s grip on the novel coronavirus outbreak. China Daily via REUTERS

March 31, 2022

BEIJING (Reuters) – Activity in China’s manufacturing and service sectors slipped into negative territory in March, an official survey showed on Thursday, falling simultaneously for the first time since the country’s COVID-19 outbreak peaked in 2020 .

The official manufacturing purchasing managers’ index (PMI) fell to 49.5 from 50.2 in February, the National Bureau of Statistics (NBS) said, while the non-manufacturing PMI fell to 48 from 51.6 in February .4 declined.

The last time both PMI indices were below the 50-point mark separating contraction from growth at the same time was in February 2020, when China was grappling with the first outbreak of the new coronavirus.

The world’s second largest economy rebounded in the first two months of 2022, with some key indicators beating expectations. But a sharp slowdown now looms as authorities restrict production and mobility in many cities, including Shanghai and Shenzhen, in a bid to stamp out a rash of COVID outbreaks.

“Recently, clusters of epidemics have appeared in many places in China, and coupled with a significant increase in global geopolitical instability, the production and operations of Chinese enterprises have been affected,” said Zhao Qinghe, senior NBS statistician.

Falling below the 50-point threshold clearly shows that China’s overall level of economic activity has declined, Zhao said in a statement accompanying the data release.

The COVID-19 lockdown in Shanghai has disrupted auto production in recent days, as two major suppliers joined Tesla to shut down plants to comply with measures to contain the spread of the coronavirus.

“PMI weakened as Omicron outbreaks led to lockdowns and disruptions to industrial production in many Chinese cities,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“As the lockdown in Shanghai only took place in late March, economic activity is likely to slow further in April.”

Chinese Premier Li Keqiang this month announced a slower economic growth target of around 5.5% this year — which some analysts saw as ambitious given the housing market slump, weak consumption and fresh COVID-19 outbreaks.

To cushion the impact of new COVID-19 lockdowns, authorities have announced steps to support businesses, including rent exemptions for some small service businesses.

The central bank, which left its benchmark interest rate on corporate and household loans unchanged in March, is expected to cut interest rates and lower reserve requirements for banks as downward economic pressure builds, analysts said.

China’s official composite PMI, which combines manufacturing and services, came in at 48.8 in March versus 51.2 in February.

(Reporting by Ellen Zhang, Stella Qiu, and Ryan Woo; Editing by Sam Holmes and Bradley Perrett)

https://www.oann.com/chinas-march-factory-activity-contracts-on-covid-resurgence/?utm_source=rss&utm_medium=rss&utm_campaign=chinas-march-factory-activity-contracts-on-covid-resurgence China’s factory and service sectors collapse for the first time since 2020

DUSTIN JONES

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