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July 2, 2020

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PMI beats forecast as factory activity expands

China’s manufacturing sector continued to recover in June, beating economists’ expectations, according to a private survey released yesterday.

The headline reading of the Markit/Caixin Purchasing Managers’ Index, which polls mostly small and medium-sized enterprises and export-oriented firms, jumped to 51.2 in June, compared with 50.7 in May.

The rise in Caixin’s June reading mirrored an uptick in China’s official manufacturing PMI, from 50.6 in May to 50.9, and was well above economists’ forecasts. Analysts polled by Reuters expected the index to hit 50.5.

A reading above 50 reflects growth in factory output, while a reading below signals contraction.

“The Caixin China General Manufacturing PMI stood at 51.2 in June, the highest reading so far this year. The manufacturing sector continued to expand, as most of the country had the (COVID-19) epidemic under control and both supply and demand improved,” said Wang Zhe, a senior economist at Caixin Insight Group.

“The epidemic flare-up in some parts of China has had limited impact on the overall economy,” he added.

However, Wang cautioned that although both supply and demand improved in the manufacturing sector, employment remained weak, with a sub-index falling to 48.6 in June from 49.2 in May and remaining in negative territory for a sixth consecutive month.

A gauge for future output expectations continued to rise in June, reflecting manufacturers’ confidence in further relaxation of epidemic controls and a normalization of economic activities.

The central government has repeatedly stressed the importance of expanding employment and increased support to small firms, which are more vulnerable to the COVID-19 crisis.

The National Development and Reform Commission, the top economic planner, decided yesterday to extend the provisional fee relief policy for parts of the credit information services sector until the end of 2020 to help firms pull through the pandemic.


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