Manufacturing activity in China contracted in May, under the effect of anti-Covid restrictions and the containment of Shanghai, according to the activity index of purchasing managers (PMI), calculated by the firm IHS Markit for Caixin Group released on Wednesday.
A number below 50 reflects a contraction in activity. Analysts were anticipating an almost identical decline (48) in this index, which is closely followed by the markets. This is her third straight month of contraction.
China, which continues to follow a strict zero Covid strategy despite a much lower number of contaminations than the rest of the world, confined its economic capital, Shanghai, in early April. The 25 million inhabitants of the metropolis remained subject to major travel restrictions in May, while the city of Beijing reinforced its anti-Covid measures, following a rebound in positive cases.
Although the restrictions have since been gradually lifted, they nevertheless continue to penalize activity and lead to supply difficulties. As a result, new orders experienced their third month of contraction in May. But this decline is more moderate than in April, according to Caixin, with some companies seeing their situation improve.
Entrepreneurial optimism, however, fell in May to its lowest level in five months, due to concerns regarding China’s pursuit of the zero Covid strategy and the war in Ukraine, Caixin said. Firmly defended by President Xi Jinping, this health policy has serious repercussions on the economy, with many businesses closed, factories operating at idle and production chains very disrupted.
The Russian invasion of Ukraine meanwhile creates more uncertainties for trade and logistics. This indirectly penalizes exports, which are one of the engines of the Chinese economy. The Caixin index followed the same trend in May as the government index but more pronounced: the official PMI was posted last month at 49.6 points, following 47.4 in April.
The Caixin-Markit survey, which mainly surveys SMEs, is reputed to paint a more accurate picture of the economy. The official figure focuses on large public companies.
/ATS
