Beijing, 31 July, 2023 (GNP): China implemented measures to boost domestic consumption following disappointing economic data, but it stopped short of announcing a major package of new spending or tax cuts.
The official Purchasing Managers’ Index (PMI), which mainly measures activity in the manufacturing sector at large businesses Domestic Consumption, and state-owned firms, came in at 49.3 in July, according to data released by the National Bureau of Statistics on Monday.
The result was slightly up from 49 in June, but the industry has now contracted every month since April. A PMI reading above 50 indicates expansion, while anything below this level indicates contraction.
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The official non-manufacturing PMI, which looks at services and construction activity, also fell to 51.5. This is the lowest rate since December, when the index hit its weakest level since the start of the coronavirus pandemic in February 2020.
By the end of last year, COVID-19 infections were spreading across China after Beijing abruptly lifted the nearly three years of strict pandemic restrictions that had been crippling local economies and isolating the second-largest economy in the world while initially suppressing the virus.
“Boosting consumption is the key to stimulating recovery and boosting demand,” said Li Chenlin, deputy director of the National Development and Reform Commission (NDRC), the country’s top economic planner, at a press conference in Beijing.
The NDRC released a policy document on Monday that includes 20 measures to revive and boost consumption.
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“China’s official PMI data offers little encouragement that the economy is turning a corner,” said Robert Cornell, regional head of research for Asia Pacific at ING Group.
Monday’s manufacturing and service sector figures are just the latest data points to show how China’s economy is struggling.
China’s GDP grew by just 0.8 percent in the second quarter of this year, significantly lower than the 2.2 percent growth rate recorded in the first three months of 2023. Consumer spending has weakened, the housing market has slumped, and the youth unemployment rate has risen to a new record of 21.3 percent.
As in other parts of the world, extreme weather has also threatened economic growth in China this summer.
Parts of China have been hit by a dual wave of heat waves and heavy rains in recent weeks, threatening to disrupt power supplies and factory activity, as well as crop production.
