In fact, China’s economic indicators are showing a backward step, contrary to the Chinese authorities’ expectations. China’s June Manufacturing Purchasing Managers’ Index (PMI) released on the 30th was 49.
It rose slightly from 48.8 in May, but did not reach “over 50,” which means economic expansion.
This is the third consecutive month of contraction (less than 50) since it fell below 50 in April.
PMI, which is based on a survey of purchasing managers of companies, is an indicator of economic trends in related fields, and if it is higher than 50, it means economic expansion and if it is lower, it means economic contraction.
Real economic indicators are also sluggish. In May, China’s economic indicator in retail sales increased only 12.7% year-on-year, a significant slowdown from April (18.4%). Even after China switched to With Corona, consumption has not recovered rapidly to the level before Corona.
The investment sector, which has long driven China’s growth, is also sluggish. Investment in fixed assets from January to May increased only 4% from the same period last year, falling below both accumulated figures (4.7% increase) and market expectations (4.4%).
The job market also froze. Last month, the unemployment rate for young people aged 16 to 24 was 20.8%, the highest ever since the previous month (20.4%).
As a result, global financial institutions are also lowering China’s growth rate hammer for this year. For international credit ratings, S&P lowered China’s GDP growth forecast for this year from 5.5% to 5.2%, for the first time this year. Earlier, JP Morgan (5.9→5.5%), UBS (5.7→5.2%), and Nomura (5.5→5.1%) also lowered their growth forecasts to the early to mid-5%.
Bloomberg predicted that if the yuan continues to weaken, the People’s Bank of China will come up with additional measures to prevent the yuan from falling.
China’s foreign exchange authorities have already begun emergency measures since this week. According to Reuters, the People’s Bank of China has been setting the yuan’s value higher than market expectations over the past week, setting the regional yuan standard exchange rate at 7.2285 yuan. This is why some analysts say that the authorities have actually intervened to curb the yuan’s weakness.
There was also a move by state banks to sell dollars. Bloomberg said state-run banks were seen swapping yuan into dollars in futures and then immediately selling it to the spot market to defend against the yuan’s depreciation, a move seen in effect at the request of the People’s Bank of China.
Apart from these emergency exchange rate measures, there are mixed prospects for large-scale economic revitalization measures that can change the large stream of the sluggish China’s economy.
