Chinese factory activity sinks, weighing on weak economy

BEIJING

According to a survey, China’s manufacturing recovery from antivirus shutdowns was slow in July. Activity sank. This adds to the pressure on the economy, which is in a politically sensitive time when President Xi Jinping may try to prolong his tenure.

Factory activity was depressed by weak global demand and anti-virus controls that are weighing on domestic consumer spending, according to the national statistics agency and an official industry group, the China Federation of Logistics & Purchasing.

The Federation and National Bureau of Statistics released a monthly purchasing manager’s index. It fell to 49 from June’s 50.2. This is based on a 100 point scale, where numbers below 50 signify activity decline. Sub-measures for new orders, exports, and employment fell.

“Downward Pressure is Great” said The Federation issued a statement naming Zhang Liqun as economist. “The epidemic continues to have an impact.”

After the output fell by 5.5% in the three months to June, the ruling Communist Party stopped talking about the official economic growth target for this year of 5.5%.

Beijing faces new challenges ahead of a meeting of the ruling party in October or November. Xi will be expected to attempt to defy tradition and to win a third five year term as party leader.

Leaders of the party made an announcement Thursday promising to “strive for the best results”, but did not mention the March annual growth target.

After anti-virus controls temporarily closed down Shanghai and other industrial centers in March, the party promised tax rebates to entrepreneurs and other assistance.

Shanghai port, one of the busiest ports in the world, reports that activity has returned to normal. However, factories and other companies are under anti-virus controls, which limit their workforce and impact production.

From June’s 52.8, the index of production fell to 49.8. New orders dropped 1.9 points, to 48.5. Export orders declined by 2.1 points, to 47.4.

Fear of reviving an escalating debt crisis, Chinese leaders have shied away from large-scale stimulus spending.