China factory activity contracts for second straight month

BEIJING

Factory activity in China shrank for a second straight month in June, data showed on Sunday, underscoring the country's shaky economic recovery ahead of a key political gathering expected to focus on deepening reform.

The manufacturing purchasing managers' index (PMI), a key measure of factory output, registered at 49.5 in June, identical to May's figure, according to the National Bureau of Statistics (NBS).

The latest official index was in line with a Bloomberg forecast based on a survey of economists.

A PMI figure below 50 indicates a decline activity, while anything above indicates an expansion.

Contraction in the manufacturing sector is a worrying sign for the world's second-largest economy, which has struggled to regain momentum since late 2022, when Beijing scrapped tough pandemic policies that had weighed heavily on growth.

China's non-manufacturing PMI, which takes activity in the services sector into account, expanded in June at 50.5, the NBS also said yesterday.

But despite the growth, that figure represented a drop from the 51.1 notched the previous month and was also lower than the 51.0 forecast by Bloomberg's survey.

NBS statistician Zhao Qinghe cautioned in a statement yesterday that while the country had "maintained overall expansion" in June, "the foundation for continuing recovery and improvement still must be consolidated."

Among the hurdles policymakers face are a prolonged debt crisis in the once-roaring property sector, sluggish consumption and high unemployment, particularly among youth.

Policymakers are due to convene in the capital Beijing in mid-July for a highly anticipated political gathering expected to focus on economic recovery.

Chinese President Xi Jinping said in a speech on June 28 that officials were eyeing "major" reforms that would "form a more market-oriented, legal and international business environment."

Xi said policymakers "are planning and implementing major measures to further deepen reform in a comprehensive manner."

"We will... form a more market-oriented, legal and international business environment," he said.

"China's door will only open wider and wider, and will never be closed."

Xi has touted the promise of significant reform several times this year and the government has already enacted measures in key sectors such as real estate to try to address critical issues.

The key meeting of top officials, originally expected last autumn, is highly anticipated in the hopes it might resolve the uncertainty that has weighed on China's economy.