Chinese Activity Recovery Slower Than Expected

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The recovery in Chinese activity continued last month, in both the services and manufacturing sectors, albeit slower than average economists expected.

 

This is partly due to the chip shortage, but also poor international logistics, the shortage of containers and rising transport prices. Furthermore, companies are concerned about a slowdown in supply and demand in the industry and increasing costs.

According to the Chinese National Statistics Office, the Chinese manufacturing industry’s composite purchasing managers index, which reflects economic activity, stands at 51.1 for April. That is slightly less than the 51.9 on which the index came out in March. A position of 50 or more indicates growth; below that, shrinkage.

ING economists remain optimistic about the Chinese services sector and manufacturing due to a recovery in export demand that will bolster factory orders and the Chinese May holiday to help the services sector. Millions of Chinese traditionally have a holiday during the first week of May. From that month on, this will lead to domestic tourism and retail sales, ING thinks.

Chinese exports did not perform as well as a month earlier. According to experts at ING, this is due to the delayed response to the recovery from the corona pandemic in the US and Europe. Exports are likely to pick up once the pandemic in these major export markets comes under control.

Furthermore, the bank’s economists warn against the technology battle that is being fought and reforms that are too fast. The tech battle may complicate China’s ambition to expand its economy with advanced technology. But it is also an opportunity for the country to develop its own technology and be less dependent on other economies, the experts said, who expects investments in tech to grow strongly in China.

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