China’s Factory Activity Shows Mixed Signals
Private Firms Grow, State-Owned Struggle
China’s economic recovery is showing mixed signals, with private firms experiencing growth while state-owned manufacturers face challenges. On Monday, a private gauge revealed that factory activity among China’s private firms expanded at its fastest pace in three years, suggesting strong demand for Chinese goods. This contrasts with an official government survey released on Sunday, which highlighted a contraction among larger, state-owned manufacturers.
According to S&P Global, the Caixin manufacturing Purchasing Managers’ Index (PMI) rose to 51.8 in June, up from 51.7 in May, marking the sixth consecutive month of improvement. In contrast, the National Bureau of Statistics (NBS) reported that its PMI remained unchanged from May at 49.5, indicating contraction.
Goldman Sachs analysts noted that the gap between the Caixin and official PMIs could be due to differences in the sectors covered by each survey. The Caixin survey includes more export-oriented and consumer-related companies, while the official PMI focuses on larger manufacturers in industrial materials production.
Senior economist Wang Zhe from Caixin Insight Group emphasized that the manufacturing sector in China experienced growth in June, driven by increasing supply, domestic demand, and exports. However, manufacturers remain cautious about the future due to recent tariff announcements from the US and EU on Chinese electric vehicles.
The European Union plans to impose provisional tariffs of up to 38.1% on Chinese electric vehicles, effective by July 4, with final duties expected by November 2. The US has also increased tariffs on Chinese electric vehicles from 25% to 100%, aiming to boost domestic manufacturing and employment.
