ACTIVITY in China’s factory sector contracted for a third straight month in June, official data showed today, signalling a patchy recovery in the world’s number two economy as global demand and raw material prices slumped.

The reading comes as the government faces calls to unveil fresh measures to kick-start growth, which has slowed in the second quarter as the post-Covid lockdown rally rebound runs out of steam.

The official manufacturing Purchasing Managers’ Index (PMI) – a key measure of factory output – came in at 49.0, below the 50-point mark that separates expansion and contraction, according to the National Bureau of Statistics.

It was above the 48.8 figure recorded in May and in line with forecasts by economists polled by Bloomberg.

Contracting factory activity has been offset by expansion in services in recent months, but tepid demand has led to slower growth in June.

The official non-manufacturing PMI, which measures business sentiment in the services and construction sectors, fell to 53.2 in June from 54.5 in May.

Economic growth has slowed sharply in April-June after lifting strict Covid rules at the end of last year, while the yuan is at a seven-month low against the US dollar as exports drop and weak domestic demand has kept inflation near zero.

Authorities are coming under increasing pressure to step in with stimulus but other than a few small interest rate cuts and pledges of action there has been little of substance out of Beijing.

The cabinet today said it would “take effective measures to enhance the momentum of development, optimise the economic structure, and promote the sustained recovery of the economy… in a timely manner”.

But Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said: “It is not clear if the weak economic data would push the government to launch aggressive stimulus measures soon.”

The government has set a modest economic growth target of about 5% for 2023, which Premier Li Qiang this week said he believed would be achieved. – AFP, June 30, 2023.