China's manufacturing activity unsurprisingly expands in May

Thu 30 Jun 22, 1:49pm (AEDT)
China red flag
Source: iStock

Key Points

  • China's official manufacturing Purchasing Managers' Index bounced back into expansion in June
  • This comes as no surprise as major cities like Beijing and Shanghai exit lockdowns
  • China's economy remains 'exceedingly fragile' as the nation doubles down on 'zero-covid'

Chinese manufacturing and services activity unsurprisingly rebounded in June after shrinking for three consecutive months.

The official manufacturing Purchasing Managers’ Index for June was 50.2, slightly below the expected 50.5, according to a Reuters Poll.

The 50-point mark separates expansion from contraction, and the index was previously 49.6 in May, 47.4 in April and 49.5 in March. 

Non-manufacturing activity also picked up significantly, spiking to a 14-month high of 54.7, up from 47.8 in May. 

“Cautious on the way you should interpret these, it simply means that things are better than last month, when major cities were shut-in,” said Aequitas Investment Partners in a note, adding that “the economy remains exceedingly fragile. Still, a positive’s a positive.”

More stimulus ahead

The Chinese government will continue to provide accommodative monetary policy and implement existing support measures, said deputy secretary general at the National Development and Reform Commission, Reuters reported.

New policy measures will be delivered in a 'timely manner' but not flood the economy stimulus and debt.

Still, Premier Li Keqiang said that the economy has managed to stabilise but the "foundation is not yet solid."

And how can things be solid after President Xi Jinping reaffirmed on Tuesday the country's strict stance on covid outbreaks.

Xi said he would rather forgo "a little economic growth" than "harm people's health", according to state news agency Xinhua.

Iron ore slips

Chinese iron ore futures are currently down -1.1%, unwavering in the face of positive economic data.

Iron ore majors BHP (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue (ASX: FMG) are also headed south, down between 2-3%.

It feels like iron ore is just a sitting duck, at risk of another small covid outbreak that sends China back into lockdown.

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

Get the latest news and insights direct to your inbox

Subscribe free