The recovery of the Chinese economy following the recent outbreaks of the coronavirus and far-reaching measures to combat Covid-19 slowed in July. The purchasing managers' index (PMI) of the Chinese business magazine "Caixin" fell to 50.4 from 51.7 points in the previous month, the paper reported on Monday. However, the economic barometer was still above the important 50-point mark, which indicates an expansion in industrial activity.
Caixin economist Wang Zhe therefore saw a generally positive development because the restrictions in the fight against the virus had been relaxed. Supply and demand are improving, but employment has continued to decline.
The surveys of the business magazine give greater consideration to private and medium-sized companies. On the other hand, the official index of the statistical office, which focuses more on large and state-owned companies, even showed a drop from 50.2 to just 49 points the day before. This official leading indicator even pointed to a decline in industrial production.
Beijing continues to pursue zero-tolerance strategy
As the rest of the world tries to live with the coronavirus, China continues to pursue a zero-tolerance policy. But the economic recovery is suffering from the strict measures, which are also less effective against the highly contagious omicron variant. In the second quarter, the second largest economy grew by only 0.4 percent compared to the corresponding period of the previous year. That was the weakest value since the pandemic began more than two years ago. The government actually wanted to achieve growth of 5.5 percent this year, but this seems less and less realistic. Experts are only calculating because of the Covid restrictions and the ongoing real estate crisis in China with an increase of around four percent. The International Monetary Fund (IMF) recently predicted only 3.3 percent growth for China.