There is no end in sight for China’s uneven economic recovery

Hong Kong CNN —

Factory activity among China’sprivate firms expanded at the fastest pace in three years, a private gauge showed Monday, suggesting healthier domestic and international demand for Chinese goods.

This contrasts with the results of an official government survey Sunday that showed a contraction among larger, state-owned manufacturers, underscoring that the recovery in the world’s second largest economy remains uneven.

The Caixin manufacturing Purchasing Managers’ Index (PMI) rose to 51.8 in June, up from 51.7 in May, according to a statement from S&P Global, which compiled the survey. The numbers not only beat market expectations but also marked the sixth straight month of improvement in the index.

But the gauge conflicted with the National Bureau of Statistics (NBS)’s PMI, which was unchanged from May at 49.5, marking a second consecutive month of contraction.

The PMI is a monthly indicator of economic activity. A reading above 50 indicates expansion, while anything below that level shows contraction.

Employees operate machines at a semiconductor factory on March 1, 2023 in Siyang County, Suqian City, Jiangsu, China.

“The divergence” between the Caixin and the official PMIs has widened further from May and is likely because of differences in the sectors covered, said analysts from Goldman Sachs on Monday.

The Caixin survey covers more export-oriented and consumer-related companies. The official PMI, however, is tilted more towards manufacturers that produce industrial materials — including steel, cement, and chemical — making them more vulnerable to a slowdown in fixed-asset investments.

Analysts believe that the current data reflects an economic reality characterised by strong exports and