China factory activity falls to lowest in 2 years

China factory activity falls to lowest in 2 years

This file photo taken on March 31, 2022, shows employees working on an assembly line producing speakers at a factory in Linquan county, Fuyang city, in China’s eastern Anhui province. (Photo: AFP)

China’s factory activity fell to the lowest level in more than two years in April, underscoring the economic damage caused by Covid-19 outbreaks and lockdowns and escalating concerns about further disruption to global supply chains.

The official manufacturing purchasing managers’ index declined to 47.4 points from 49.5 in March, according to data released by the National Bureau of Statistics (NBS) on Saturday. That was largely in line with the median estimate of 47.3 in a Bloomberg survey of economists.

The non-manufacturing gauge, which measures activity in the construction and services sectors, plunged to 41.9 from March’s 48.4, hitting the lowest since February 2020 and well below the consensus forecast of 46. A reading above 50 indicates expansion, while anything below indicates contraction.

The deterioration in manufacturing activities was due to sharper declines in both production and demand, the statistics bureau said in a separate statement. The latest coronavirus outbreaks, which frequently hit multiple places across wide areas, forced some enterprises to reduce or even stop production.

Activities in the service industry fell sharply “due to the severe impact from the outbreaks,” Zhao Qinghe, an NBS senior statistician, said in the statement. Business activities in 19 of the 21 services sectors surveyed, including air transport, accommodation and catering, contracted, he said.

This photo taken on Thursday shows residents queueing to undergo nucleic acid tests for Covid-19 in Guangzhou, China’s southern Guangdong province. (Photo: AFP)

Beijing is under increasing pressure to boost growth as Covid outbreaks and restrictions in many cities paralyse much of its economy, the world’s second-largest.

Many manufacturers have tried to keep operating by using so-called closed-loop systems, where workers live on site and are tested regularly. But activity has still been hampered by lengthy curbs on mobility, including in places like Shanghai, where large swaths of the population have been locked down for a month.

Logistics bottlenecks have caused parts shortages and made moving people and goods within the country and across borders difficult. Consumer spending has also dropped as people stay home, voluntarily or unwillingly.

Policymakers have escalated their pledges to support the economy, culminating in Friday’s high-level Politburo meeting, where top leaders led by President Xi Jinping promised to use more pro-growth policy tools. They reiterated a call for the government to strive for full-year economic goals, though did not back down from the country’s Covid Zero policy. Some economists have deemed the strategy the biggest risk to growth.