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China tries to boost consumer spending as factory sector contracts for fourth month
Hong KongCNN —
China unveiled a series of measures to boost domestic consumption Monday after more gloomy data about the health of the economy. But it stopped short of announcing a major package of new spending or tax cuts.
The official Purchasing Managers’ Index (PMI), which measures activity in the manufacturing sector at mainly larger business and state-owned firms, came in at 49.3 in July, according to data released by the National Bureau of Statistics on Monday.
That result was slightly up compared with 49 in June but the industry has now contracted each month since April. A PMI reading above 50 indicates expansion, while anything below that level shows contraction.
The official non-manufacturing PMI, which looks at activities in services and construction, also fell, to 51.5. That is the lowest rate since December, when the index hit its weakest level since February 2020 at the start of the coronavirus pandemic.
By the end of last year, Covid infections were sweeping through China after Beijing abruptly ended nearly three years of draconian pandemic restrictions that initially kept the virus at bay while hammering local businesses and isolating the world’s second largest economy.
“Boosting consumption is the key in stimulating recovery and expanding demand,” said Li Chunlin, deputy director of the National Development and Reform Commission (NDRC), the country’s top economic planner, at a press conference in Beijing.
A worker produces automotive bearings at a factory in Hangzhou, in China's eastern Zhejiang province on July 31, 2023.
China’s official PMI data provides little encouragement that the economy is turning the corner,” said Robert Carnell, regional head of research for Asia-Pacific at ING Group.
Monday’s manufacturing and service sector figures are just latest data points that show how China’s economy is struggling.
China’s GDP grew just 0.8% in the second quarter of this year, down significantly from tepid 2.2% growth it registered in the first three months of 2023. Consumer spending has weakened, the housing market has slumped, and the youth unemployment rate has soared to a fresh record of 21.3%.
Much like many other parts of the world this summer, extreme weather has also posed a threat to economic growth.
In recent weeks parts of China have been hit by a double whammy of heat waves and torrential rain, threatening to strain power supplies and disrupt factory production as well as crop yields.
New measures to boost consumption
The frail data has prompted Beijing to increase efforts to shore up growth, with a series of announcements in recent weeks.The measures announced by the NDRC on Monday cover a wide range of industries, including automobile, real estate, electronic products, and services industry.
Officials from four other central agencies, including the Ministry of Industry and Information Technology and the Ministry of Culture and Tourism, also said at the press conference that they would roll out specific measures to support their respective industries.
