How the World’s Second-Largest Economy Deals With Pandemic

People, as well as companies all over the world, are working hard to deal with the economic impact of the coronavirus pandemic. To have a better understanding of the situation, it is important to learn more about the world’s second-largest economy.

Based on the information provided by the National Bureau of Statistics, the official manufacturing Purchasing Manager’s Index (PMI) for August came in at 51.0. Interestingly, compared to July, it fell from 51.1 to 51.0. Moreover, despite the fact that manufacturing activity expanded in August, the pace of expansion missed expectations. Analysts expected August PMI to reach 51.2.

People should take into account that PMI readings above 50 indicate expansion, while the result below 50 signal contraction. It is worth mentioning that PMI readings are sequential and indicate on-month expansion or contraction.

Interestingly, the official PMI survey typically polls a large proportion of big businesses as well as state-owned enterprises. However, the private survey released by Caixin and IHS Markit features a bigger mix of small and medium-sized firms. The private survey will become available on Tuesday.

The coronavirus pandemic created a lot of problems for the second-largest economy in the world. The virus emerged from the Chinese city of Wuhan. The country’s government took decisive steps to contain the spread of the pandemic. As a result, large-scale lockdowns affected the local economy.

Local economy and National Bureau of Statistics

Let’s get back to August PMI. Notably, heavy floods in south China also affected manufacturing activity. For example, some companies in Chongqing reported problems connected with the procurement cycle of raw materials. Moreover, the number of orders and production also fell. Importantly, growth in services moved at a faster rate last month with the official non-manufacturing PMI coming in at 55.2 As a result, compared to July non-manufacturing PMI increased from 54.2 to 55.2.

Importantly, demand was gradually recovering in August, last month it was recovering at a faster pace than in July. For instance, new orders for products such as pharmaceuticals, electrical machinery as well as equipment. According to the National Bureau of Statistics, exports were also improving in general.

As mentioned above, China’s manufacturing sector suffered heavy losses due to large-scale lockdowns to contain the coronavirus pandemic. Hopefully, recent data that came from China, shows that the local economy is recovering and this is good news. Notably, manufacturing activity expanded for the fourth month in a row in July. Moreover, industrial output expanded for the fourth straight month in July.

It is worth noting that, the recovery in China is driven partly by the country’s government financial support. The government allocated money for infrastructure. Furthermore, China’s dollar-denominated exports rose 7.2% on year in July. Export of medical supplies jumped in the first six months of the year.

As can be seen from the data stated above, despite all challenges the local economy has the potential to deal with the coronavirus pandemic. China should work with other countries to get the global economy back on track as soon as possible.