After showing a fast recovery in the first quarter, Chinese manufacturing met with a snag in April. The official manufacturing purchasing managers' index is at 49.2 for April. Compared to 51.2 in March.
Analysts are saying that the slowdown in manufacturing might be due to lower demand for exports. Manufacturing accounts for 18% of employment in China and it is a vital sector of the economy. China is often considered to be the factory of the world.
The current drop in production is due to the global conditions. Higher interest rates and surging prices have lowered the global demand for goods.
The Politburo also commented that for a long-term recovery, it is essential to fix the demand in the market. The top decision-making body of China described the current recovery as ‘restorative’.
The PMI showed that the new export orders had gone down from 50.4 in March to 47.6 in April.
The manufacturing sector remained under pressure as some exporters reported cuts in labor costs. The low global demand is preventing the sector from growing to its full potential once again.
The cabinet has been taking steps to facilitate trade from its end. It has increased the number of visas given to overseas traders and increased the subsidies to firms that hire college graduates.
Data this month showed retail sales picking up in the country, however, the basis point for this comparison is already very low. The comparison is between now and the year 2020, so this does not give an accurate picture.
The non-manufacturing PMI has also shrunk from 58.2 to 56.4 this month. The composite PMI has dropped to 54.4 from 57.0.
The key real estate sector in China is still in trouble. The long list of woes that China’s biggest real estate developers face are well-known. In this precarious condition, the global markets are sending mixed signals to the Chinese industry. Under the current state of affairs, the government will be forced to continue its fiscal support to the industry even in the second quarter.
