China: Recovery looks faster than forecasted – UOB

Economist at UOB Group Ho Woei Chen, CFA, assessed the latest official PMI figures in the Chinese economy.

Key Quotes

“China’s official Manufacturing Purchasing Manager’s Index (PMI) rose 0.3 point to 50.9 in June… while the non-manufacturing PMI jumped 0.8 point to 54.4 in June – highest reading since November 2019 when it was at the same level. The better-than-expected PMI readings for both the manufacturing and services sectors point to a stronger recovery in China’s economy in June as the country keeps its second wave COVID19 in check and global demand picks up with more economies exiting their lockdowns.”

“Key sub-indexes within the manufacturing PMI improved in June, including production (53.9 vs. 53.2 in May), new orders (51.4 vs. 50.9 in May) and new export orders (42.6 vs. 35.3 in May). The huge rebound in new export orders sub-index increase confidence that the external demand is picking up.”

“Despite the improvement in June PMIs, pockets of weakness in employment as well as the sluggish performance of small-sized enterprises still call for sustained government support measures including the interest rates and banks’ reserve requirement ratio (RRR) cuts as well as financing support such as the re-lending facilities.”