The sleeping panda slowly awakens

Company News

by Glenn Dyer

Activity in China’s huge factory and services sectors in June grew for the first time in four months as the easing of Covid lockdowns in Shanghai, Beijing and other cities continued.

Manufacturing moved back into expansion territory but activity in the service sector – especially in retailing, surged to the highest level for more than a year.

The easing of the severity of the government ordered lockdowns and other controls such as this week’s halving of Covid quarantine times saw wide areas of major cities re-open in June and retail activity in particular rise sharply.

This in turn helped Chinese share markets enjoy a solid rise in June.

The CSI 300 index of Shanghai- and Shenzhen-listed stocks was up nearly 10% in June. That’s the biggest one-month rise since July 2020, when global investors snapped up Chinese shares as the country exited its first round of Covid-19 lockdowns ahead of the rest of the world.

China’s cut to quarantine requirements for international arrivals from two weeks to one this week was the first significant relaxation of travel restrictions since authorities brought Covid outbreaks in Shanghai and Beijing under control in early June.

But as welcome as June’s bounce is, the markets are still in the red for 2022 with the CSI 300 off around 8% year to date.

China’s National Bureau of Statistics said the country’s non-manufacturing activity survey saw a sharp rise in the rate of expansion in the service sector activity survey – 54.7 against 47.8 in May. (The 50-point mark separates contraction from growth.)

It was the first expansion in the service sector in four months and the strongest growth since May 2021.

Both new orders (53.2 vs 44.1 in May) and new export orders (50.1 vs 42.8) returned to expansion while employment declined at a softer rate (46.9 vs 45.3).

It was a similar story in manufacturing where the index rose to 50.2 in June from 49.6 in May. That saw June experience the first expansion since February, according to the National Bureau of Statistics (NBS).

That was slightly less than forecasts for an expansion of around 50.5 but the 50.2 reading was still the strongest for six months.

Output (52.8 vs 49.7 in May), new orders (50.4 vs 48.2), and buying levels (51.1 vs 48.4) all bounced back, all growing for the first time in four months.

At the same time, both new export orders (49.5 vs 46.2) and employment (48.7 vs 47.6) shrank at a slower pace.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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