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China’s small factory activity continued to strengthen in June, but foreign demand remained subdued

  • Caixin/Markit manufacturing purchasing managers’ index (PMI) rose to 51.2 in June from 50.8 in May. A reading above 50 signifies growth
  • Survey follows official PMI which showed positive outlook for larger Chinese manufacturers

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The Caixin/Markit manufacturing purchasing managers’ index (PMI) rose 51.2 in June from 50.8 in May. Photo: Xinhua

China’s economy showed a further rebound in June thanks to a faster recovery in manufacturing and services, but weak foreign demand and downward pressure on employment showed there is still some way to go to reach pre-coronavirus levels.

The Caixin/Markit manufacturing purchasing managers’ index (PMI), released on Wednesday, rose to 51.2 last month from 50.8 in May, beating analysts expectations and showing production at smaller Chinese factories was improving. The 50-point mark separates contraction from growth.

The reading was another bright spot for China’s economy following Tuesday’s official manufacturing PMI that indicated factory activity among larger firms improved slightly to 50.9 in June, from 50.6 in May. The non-manufacturing PMI, also released by the National Bureau of Statistics on Tuesday, rose to 54.4.

“The June readings reinforced the trend of China’s economic recovery, which could turn positive in the second quarter,” said Liu Xuezhi, a senior analyst with the Bank of Communications. “It was mainly driven by government measures to resume production.

The downside risk is the weak external demand owing to the coronavirus global pandemic, while domestic consumption of offline businesses, including catering and tourism, remains affected.
Liu Xuezhi

“The downside risk is the weak external demand owing to the coronavirus global pandemic, while domestic consumption of offline businesses, including catering and tourism, remains affected.”

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