Following its stringent zero-Covid strategy and a general trend in global manufacturing to diversify supply chains, China suffered three months of activity decline in its factory and service sectors between March and May 2022. However, since authorities lifted strict lockdown rules in Shanghai at the end of May 2022, a recovery finally seems to be under way.
Fast rebound for China’s manufacturing in June
In June, China’s manufacturing activity increased at its fastest rate in 13 months, with the Purchasing Managers Index (PMI) – an economic indicator tracker that utilises surveys of selected private companies – tracking growth in June 2022 for the first time since February, with an index of 50.2.
This a much-needed boost for China’s manufacturing companies. In May 2022, the National Bureau of Statistics (NBS) reported that industrial companies with a business revenue of $3m or above were seeing profits decline by approximately 6.5% year on year, although this was a slight improvement from the 8.5% year-on-year contraction reported in the previous month.
The NBS report went on to highlight that almost half of Chinese manufacturers surveyed said that “reported orders were insufficient”, despite a PMI sub-index for production recording its highest figure since March 2021, at 52.8.
High hopes for the second half of 2022
The State Council Information Office of China (SCIO) put out a statement on 20 July 2022 saying that “China’s industrial economy showed great resilience in the first half of the year amid complex situations at home and abroad”.
The press release went on to highlight that despite continuing challenges, its data showed that value-added industrial output increased by 3.4% in the first half of 2022 compared with the same six months of 2021. Furthermore, following restrictions being lifted in key industrial locations, June was particularly positive for output growth, with a 3.9% year-on-year increase.
Looking towards the second half of 2022, the SCIO highlighted electronic information manufacturing, new energy vehicles and consumer goods as key subsectors for the industry. The report ends by saying that hopes for a V-shaped recovery are high in China following July’s promising rebound figures, yet it seems manufacturers are slow to share the optimism after such a tough start to 2022.