Home China China’s Economic Activity Shows Decline in June, Prompts Calls for Stimulus

China’s Economic Activity Shows Decline in June, Prompts Calls for Stimulus

China's economic, stimulus, recovery
Workers inspect dual-mass flywheels at the production line during an organised media tour to an auto parts factory of Valeo Kapec Torque Converters (Nanjing) Co., Ltd in Nanjing, Jiangsu province, China. REUTERS/Ellen Zhang

China’s economic indicators for June reveal a downturn. Manufacturing activity registered its second consecutive monthly decline, with services activity hitting a five-month low. The National Bureau of Statistics (NBS) reported a Purchasing Managers’ Index (PMI) of 49.5, unchanged from May and below the critical 50-mark indicating contraction. Analysts had anticipated this figure, reflecting ongoing challenges in the economy.

China’s economic concerns

Xu Tianchen, a senior economist at the Economist Intelligence Unit, noted that official data may underestimate actual industrial activity—particularly export momentum, a key driver this year. However, demand both domestically and internationally remains insufficient to fully utilize China’s manufacturing capacity. This poses barriers to a recovery in producer prices.

Key indicators such as new orders, raw material stocks, employment levels, supplier delivery times, and new export orders all remained in contractionary territory according to the NBS survey. These factors highlight broader economic pressures facing China amidst global trade tensions and a lingering property market crisis dampening domestic demand.

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Simultaneously, the non-manufacturing PMI, encompassing services and construction, declined to 50.5 from 51.1 in May, signaling subdued economic sentiment. Specifically, services dropped to 50.2, its lowest since December, while construction recorded 52.3, the weakest since July of last year.

Economists anticipate the Chinese government will implement additional policy support measures in response. Hao Zhou, chief economist at Guotai Junan International, emphasized the necessity for enhanced government intervention to bolster domestic consumption and stabilize economic growth.

Premier Li Qiang highlighted the importance of nurturing new industries during a recent address, underscoring efforts to diversify economic drivers beyond traditional sectors. As China prepares for the Third Plenum scheduled for July 15-18, where strategic economic policies will be discussed, attention remains on navigating these challenges to sustain economic resilience and foster long-term stability.