China’s economic woes deepen as manufacturing takes a hit

China’s economic challenges are rising amid a resurgence of Covid 19 outbreak. China’s official manufacturing Purchasing Managers’ Index (PMI) – an indicator of economic activities – dropped to 48 in November from 49.2 in October. While economists have underlined the need for a coordinated action from central and local governments, many said that the reversal of the trend may not be evident on an immediate basis.

A reading below 50 indicates contraction.

After staying in the green for almost the entire 2021, even as several countries including India were battling a severe outbreak of the Delta variant of the virus, the country’s manufacturing sector is facing a stiff challenge. Of the 11 months in 2022, about seven months have registered a contraction in PMI.

According to Beijing based Global Times, the decline in the manufacturing PMI was mainly driven by the frequent outbreaks of COVID-19 in several parts of the country, combined with weaker market demand.

As China continues with it zero Covid policy, economists the world over have warned that the approach would bring more pain for its citizens.

Analysts said that with more than 21 per cent of China’s economy now coming under lockdown, economic growth has been severely impacted in the October-December quarter and it could even go into negative.

Several factories including Volkswagen AG and Honda Motor have halted operations due to the surge in Covid cases.

According to a Wall Street Journal report, economists now expect China’s growth this year to be the weakest in decades, excluding 2020, when the pandemic first struck, as a result of repeated city lockdowns, a drawn-out real-estate slump and fading demand for its exports overseas.

Amid stringent lockdown, protests have also broken out at many places.

“This unusual show of defiance may weaken consumer consumption even more, analysts say, further clouding the outlook for the world’s second-largest economy,” the report said.

Also read: Will China’s growth rate slip into negative in the Oct-Dec period?